LONDON, UNITED KINGDOM -- (Marketwire) -- 03/05/13 -- - At the end of 2012, remortgaging activity in the UK was just a quarter (24%) of the levels at the start of 2008.
- Between January 2008 and October 2008, the number of remortgages accounted for half (51%) of total mortgage lending.
- From November 2008 to July 2011 the number of remortgages accounted for two fifths (39%) of total mortgage lending whilst fixed rates were on average above SVR.
- Since the end of last summer there has been a slight revival in remortgage activity (rising by 7% Q4 on Q3) as average fixed rates fell below the average SVR.
- Lloyds TSB is on hand to help with remortgage rates reduced by up to 0.25%, a free switching service and GBP 500 cash back for current account customers.
According to the latest analysis from Lloyds TSB, borrowers may no longer be better off staying on standard variable rates (SVRs). Since late 2008, falling SVRs lessened the gap with fixed rate mortgages and significantly reduced the incentive for many borrowers to remortgage. However, given the recent fall in fixed rates, some homeowners may find a better rate by remortgaging.
Whilst the total number of remortgages in 2012 was 12% lower than in 2011, there were some signs of improvement in the latter part of the year with a 7% increase in remortgaging activity between the third and fourth quarter.
The fall of SVR below fixed rates
Historically, remortgage activity has typically been driven by borrowers replacing their fixed home loans at the end of their term to avoid moving on to an SVR. This is because SVRs, on the whole, were more expensive and brought uncertainty over future monthly payments. However, this changed in recent years as interest rates fell to an all time low.
SVR on the rise, fixed rates on the fall
Even though SVR rates have generally been higher than fixed rates since August 2011, remortgaging activity on the whole has remained subdued, averaging 29,700 per month (37% of total mortgage lending). Over this period, the average SVR rate was 24bps more than average fixed rates (Fixed rates 3.96%; SVR 4.20%).
With fixed rates falling since August 2012, the incentive to remortgage should have increased. For example, if a homeowner took out a 2-year fixed rate in December 2012, their monthly payment would be GBP 519; in the same month the payment on an SVR mortgage would have been GBP 548.
Lloyds TSB cuts the cost of remortgaging for current account customers
Lloyds TSB is reinvigorating the remortgage market by reducing the rates on a number of its remortgage deals by up to 0.25%. As well as taking advantage of the free switching service which removes the hassle and expense of remortgaging, Lloyds TSB current account customers can also benefit from GBP 500 cashback(2).
The offer includes:
- GBP 500 cashback for Lloyds TSB current account customers
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