The level of loans for new house purchases in the UK continued to enjoy a steady increase in 2009. According to the Council of Mortgage Lenders, the trade association whose members account for approximately 98% of all UK mortgage lending, new house loans returned to their December 2007 levels. In addition, the remortgage market has seen a stabilisation of growth over the same period of time.

Stabalising Remortgages

There are several factors that contributed to the stabilisation of British remortgage volumes. The most notable factor is that market conditions became more favourable for first-time homebuyers and home movers (homeowners who sell their primary residence and buy another). Recent home price increases and a trend toward lower interest rates for those with substantial assets were just the incentives for which many people were waiting.

According to data published by the Council of Mortgage Lenders, the number of loans that went to home movers rose by 15% from September to October 2009. A significant number within that group opted for a tracker mortgage loan, a loan where the interest rate rises and falls in line with the Bank of England base rate. This is believed to be an indication in borrower confidence that rates may remain low for the long term.

The Current Lending Guidelines

While remortgages have stabalised, they have not shown growth since the credit crisis. Indeed, tight lending guidelines have exerted an adverse impact on remortgaging. The best loan terms go to remortgagors who are asking for a loan equivalent to 60% or less of the home value. Homeowners with less equity in their home are considered as more of a risk, and their loans are priced accordingly.

In addition, another factor limiting the growth in remortgages involves the growing number of families who have experienced some form of economic hardship. Without the pristine credit record that they enjoyed during the initial home purchase, borrowers have a much harder time getting a remortgage loan approval. In the past, many families would remortgage their current home to release the equity and apply it toward the purchase of a new home. Other families would take advantage of a remortgage opportunity to pay off debt or invest in additional assets. Today, more and more families are opting to pay down the mortgage debt instead.

Looking to Future Remortgage Statistics

In response to recent remortgage statistics, Council of Mortgage Lenders director general explained, “We are still in a two-speed mortgage market. It appears that low interest rates for those with substantial deposits, coupled with this year’s sustained increases in house prices, are encouraging more people to buy or move.” In further expounding upon the issue, the director general stated, “But the same low rates that are driving house price activity provide little incentive for borrowers to refinance their loans. This, coupled with tightness in lending criteria, continues to hold back the remortgage market.”

Remortgage candidates are patiently awaiting the return of a more favourable time. If home values continue to increase in 2010, it may spark the surge of remortgages for which they hope.