UK remortgaging fell in May at a value of £3.3 billion down from £4 billion in April at a level of 17% according to data released from the Council for Mortgage Lenders.  This supports other data released from the British Bankers Association and from Legal Marketing Services (LMS).  The drop despite the warnings from economists that the current low interest rates are destined to disappear is being credited to the tightening of lending and the new Mortgage Marketing Review guidelines put into place in April.  The guidelines are to assure responsible lending and that borrowers can afford their loan both now and when interest rates increase.

Andy Knee, Chief Executive of LMS, said, “Remortgaging continues to lead the market slowdown as lenders tighten their lending criteria, pre-empting any government cap to tackle concerns about an overheated mortgage market.

“In some cases customers have been put off by the less competitive rates now on offer, as lenders raise rates to give themselves some breathing space as they get to grips with MMR. We expect remortgage lending to recover strongly in the months ahead when lenders fully adjust to the system, rates improve and a base rate rise finally happens.”

The report from LMS estimates that remortgage lending fell by 19% in May from April to 21,396.  The average remortgage loan value also fell in May by 3% from April to £155,448.  This drop was the first since October 2013 yet it was still 7% above the level reported in May of last year.

Remortgaging demand is expected to remain elevated in comparison with last year with a jump in demand once the standard base interest rate is increased by the Bank of England’s Monetary Policy Committee.  As homeowners see their lender’s standard variable rate (SVR) begin to reflect the higher cost of borrowing they should begin to seek out a new deal.  Remortgaging will begin to gain interest from those homeowners seeking to secure a low interest rate rather than pay the higher risky SVR of their lender.