Loans for home movers and first-time buyers drove the housing market in July as borrowers took advantage of low mortgage rates and more stock coming onto the market, says the Council of Mortgage Lenders.
Given that rates are so competitive, it is surprising that remortgaging continues to be muted. This may be down to borrowers fearing that they won’t be able to remortgage as a result of the new mortgage rules or simply enjoying such good standard variable rates that they don’t see the point. Until an interest rate rise is imminent, many borrowers who are reluctant to remortgage are unlikely to feel the urge to do so.
What may convince them is some of the great new rates coming onto the market since the summer. Lender competition is hotting up with Barclays, Nationwide, Skipton and Coventry all cutting their fixed rates this week. Falling Swap rates, as well as lenders looking to meet year-end targets, is behind these moves. With Mark Carney alluding to the possibility of a rate rise in the spring, borrowers may feel that the case for remortgaging is getting stronger.
First-time buyers continue to return to the market, and in July took on the highest average loan size for a first-time buyer on record. While this may be cause for concern, the new mortgage rules should at least ensure that those mortgages are affordable both now – and in the future, when rates rise. However, borrowers still need to be cautious about the level of borrowing they are taking on and not overstretch themselves.
Buy-to-let continues to grow as investors seek better returns than they can earn on cash and more certainty than the stock market. Lenders have been cutting buy-to-let rates and easing criteria but the threat of regulation of some buy-to-let loans will introduce an unwelcome extra level of complexity and cost.