Remortgaging hits 5-year low

New data from the Council of Mortgage Lenders shows that levels of remortgaging have reached their lowest figure for five years. Figures for September show that remortgaging accounted for 30% of the market by value - the lowest figure since August 2001 and down from 42% in September last year. And the data for Q3 reflects this trend - remortgaging accounting for just 31% of the market, compared to 39% in the third quarter of last year.

The sharp drop in the popularity of remortgaging over recent months probably reflects the fact that lenders are managing to retain more customers for longer by reducing the incentive to remortgage to other lenders.

The number of people taking out fixed-rate deals has also shown a sharp fall. While fixed rates maintained a 59% share of the market in September - unchanged from August - in the third quarter of this year they accounted for 60% of all loans, compared to 70% in the second quarter.

The fall in the take-up of fixed rate deals reflects their pricing becoming less attractive compared to variable rates. The average interest rate on a fixed-rate mortgage reached 5.24% in September, up from 5.18% in August.

Meanwhile, the number of loans to first-time buyers fell to 31,100 in September, from 35,200 in August. This is down from 34,700 in the same month last year. Loans to home movers followed the same trend, falling from 66,100 in August to 56,700 in September. This is down slightly from the 57,300 loans to home movers in September 2005.

Commenting on the data, CML Director General Michael Coogan said that the latest figures show that slowly but surely the market is cooling as we approach the end of the year in an environment of higher interest rates.

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2006-11-15 10:32:30 © Moneyextra.com