Remortgages Decline in December as Demand Weakens
Remortgages and new purchase mortgage approvals contributed to the recent 19 month high for mortgage approvals in December. The British Banker’s Association (BBA) reported there were 36,171 approvals the last month of 2011 which was an increase over the November numbers of 34,809 approvals. Net mortgage lending was £734 million which was a large increase over the £465 million in the previous month.
Remortgages were not as strong in December. The number of remortgages declined to 21,164 from 21,788 that were approved in November according to the BBA.
Howard Archer, chief UK economist at IHS Global Insight, remarked "Mortgage approvals remain persistently low compared to long-term norms. At 36,171 in December, mortgage approvals were only 64pc of the average monthly level of 56,544 seen since 1997."
Remortgages may have fallen in the final month of the year due to regular seasonal drops in remortgage lending. However, it may have also been subdued due to the fact that there is little to bring homeowners in to make a deal. Homeowners had in the beginning of the year a threat of a possible interest rate increase by the Bank that pushed them into new deals. Later in the summer there were fantastic remortgages offered by lenders as they competed with one another to offer the best deal to grab the attention of homeowners.
The problems in the eurozone and threats of a second recession caused lenders to become more cautious. They began to pull their best deals leaving little to push homeowners toward a remortgage. Remortgages may pick in the next few months as homeowners choose new remortgages to secure a low interest rate while lending is eased. The one thing that could push homeowners to come back is the threat of tighter lending in the near future. Now deals can be found and not all lenders are worried about lending risk. Remortgages are still attainable and the threat of tighter lending practices could push remortgages into demand again.