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Remortgages | 27
relaxation in the strict control on LTV ratios The future
for first-time buyers, and the welcome news Therefore what does the future hold? In the
that lenders such as Kensington are starting to next nine to 12 months as BBR stays at 0.5
return (albeit with limited distribution), per cent, and as existing product deals end,
access to the property market still remains borrowers will continue to stay on their
very tight particularly given the bounce back existing lenders’ SVR as many of them will be
in house prices in recent months. below the rates offered for those choosing to
However, the lack of supply of property remortgage. These will continue to be
coming onto the market is proving to be an perceived as uncompetitive rates for
increasingly important obstacle to a more borrowers who have not managed to organise
meaningful pick-up in transaction levels. I a remortgage but will continue to be among
believe the number of new instructions for the best rates in the market. In short, until
estate agents will remain fairly low into the Base Rate begins to rise, a very large number
year end. The economists will argue that of borrowers will be content to remain with
it is very important that a continuing supply their existing lender and many will be using
of properties is placed with agents in the the surplus cash to pay down the outstanding
early part of 2010 to maintain the mortgage balance while the waiting game
momentum and not create any skew in continues.
house prices. To the man on the street it may seem odd
to be actively looking for a Base Rate rise,
Transactions however, when this does happen it will be a
So where does this leave the remortgage moment to celebrate. This is because it will
market? Even though transaction levels show that we are finally on the road to
are picking up for purchases what about economic recovery – let us not forget that a
those people who just want to change 0.5 per cent Base Rate environment is far
mortgage provider, perhaps for a better rate? from normal. The state of the economy is still
Or maybe to raise cash to carry out home fragile and therefore we should be actively
improvements? Or even raise money to looking for a more stable situation – a rising
repay expensive short-term loans? Why have Base Rate will signal this.
approvals fallen by two-thirds from the
highs of 2007? Kick start
Firstly, we have a large number of people Secondly, an increase in Base Rate should
who would like to remortgage but are signal a kick-start to the (re)mortgage market.
unable to and we have an equally large Lenders will raise SVRs and borrowers who
number who can remortgage but don’t wish have been able to sit back and do nothing will
to. Taking the latter group first, these are undoubtedly feel that rates can only go one
individuals who as a consequence of the way (albeit slowly) and they should again
Credit Crunch and collapse in interest rates start looking for a special rate. We should
have seen their mortgage payments at this point be moving to a rather more
drastically reduce as they move from a normal and healthy lending environment as
previous fixed or tracker onto an SVR which well. At present those lenders with money to
is less than they were paying and more lend are making hay while the sun shines; as
importantly less than any new product the only show in town they are charging
currently available. Let us also not forget that considerable margins and using the lack of
a move to an SVR does not come with any competition as a means to boost lagging
arrangement fee or other cost of balance sheets.
remortgaging. Borrowers should not fear a Base Rate
increase; a 1 or 2 per cent increase in Base
Self cert Rate is not going to mean a corresponding
Those who would like to move mortgages but increase to the rates currently being offered.
Northern Rock are unable to are generally caught in two For example, a first-time buyer who might
wobbled, there were camps: people who have suffered an equity only be able to get a mortgage with a rate
168,291 mortgage approvals reduction and now find their loan of 6 per cent now, is not going to be
recorded; by August 2009 requirement is beyond the maximum 90% confronted with a market of 8 per cent
just 82,137 approvals were reported. LTV. And those individuals who fall outside products should Base Rate increase by 2
Approvals for remortgaging continue to be at of much tougher underwriting and per cent. Lenders will not price in this
one third of the level seen in the last few affordability tests to assess suitability - a way; the margins will be slimmed to ensure
years. The number of remortgage approvals particular problem for lower income earners. they do not price themselves out of the
in October 2009 fell again to 20,685 from Moreover, there are an estimated one million market.
21,054 in September. borrowers who took out mortgages on a self- The true catalyst for any meaningful
certified basis and are not currently able to remortgage market will be a Base Rate rise of
Funding availability re-apply as such products have essentially any kind. Until that time, SVRs will continue
Although the availability of finance for been banned, regardless of the people who to rule the roost and borrowers will have little
homebuyers has increased a little in recent have never missed payments and just require inclination to remortgage to less competitive
months with some evidence of a modest the same access to the market as others do. and more expensive rates. January 2010 Mortgage Introducer
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