- Number of remortgage loans also rose by 16% from August
- Remortgage repayments account for less than a fifth of total income, the smallest amount in a year as wages rise for third consecutive month
Latest figures from LMS reveal that monthly gross remortgage lending saw an increase of 19% in September to £4.4bn, up from the £3.7bn in August reported by the Council for Mortgage Lenders (CML). This is the largest value of remortgage lending seen since September last year as customers capitalise on the competitive deals currently on offer.
LMS estimates that the number of remortgage loans also rose by 16% to 27,734 in September. However, this figure is down 14% from this time last year, when there were 32,400 remortgage loans recorded.
The average remortgage loan has risen to £158,661 — a 2% increase from last month and 5% higher than the average loan of £151,428 in September 2013.
The remortgage market share now equates to 25% of the total market, 5% higher than last month but down from 29% in September last year.
Commenting on the latest figures, Andy Knee, Chief Executive of LMS says:
"This month’s figures demonstrate that many customers are seeking to take advantage of the competitive rates on offer at present. Tighter lending criteria and the introduction of MMR took their toll in the earlier part of the year but the market has recovered well to record the largest lending value seen in the last 12 months.
"There are some excellent offers for customers willing to shop around, and the opportunities for remortgaging in particular are boundless — with the biggest difference in rates between remortgaging and new purchase mortgages that we’ve seen for two years — offering homeowners some welcome relief.
"As affordability remains critical to so many home owners, especially when an interest rate rise occurs, it would be foolish not to examine the options that may be available.
"Continued house price growth over recent months has come to the rescue of many households, bringing them out of negative equity and easing restrictions, providing many with the opportunity to remortage for a better rate.
"People are therefore advised not to be complacent, but to examine their options now as uncertainty ahead of the election next year, the prospect of an interest rate rise and changing economic conditions may introduce a note of caution to the market, curtailing lender appetites."
According to CML data, the average remortgage interest rate increased to 3.21% in August, the highest rate since June 2013. However, the average monthly household income for all new mortgages rose by 0.5% in August, to an average income of £46,411 according to the CML. August’s average income is also 6.6% higher than this time last year as wages saw growth for the third month in a row.
Based on this, LMS calculations show that annual remortgage repayments account for less than a fifth (19.7%) of household income — the lowest amount in more than a year (July 2013) — and lower than last month when they accounted for 20.3%.
This remains substantially lower than the typical rate for a new purchase mortgage, which has a rate of currently 22.1%. The difference between purchase mortgage and remortgage annual repayment as a percentage of income is the largest it has been for two years (2.50% in August 2012).