Despite figures remaining strong in February, LMS believes that caution may be starting to set in as affordability tightens.
According to the data, the value of remortgaging fell in February, down from £7.1bn in January to £6.8bn – the result of a decline in the average loan size, which fell by £7,347 to £154,138.
Total mortgage lending fell by 8%, which meant that remortgaging accounted for two-fifths (37%) of total lending in February – the greatest amount since March 2011.
Despite the rise in the number of people remortgaging, affordability is beginning to worsen. In January, the repayment as a percentage of total income rose month-on-month from 16.9% to 17.8%.
Anticipation of a rate rise also remained high in February, with 49% expecting a rate rise within the next year. The number of homeowners who said they will wait more than eight years to remortgage also increased from 11% in January to 17% in February.
LMS believes the combination of worsening affordability, continued expectation of a rate rise and an increase in the number prepared to wait more than eight years to remortgage again indicates that "the road ahead for the remortgage market may be rocky".
Andy Knee, chief executive of LMS, responded to the findings: “February enjoyed the biggest boom in recent remortgaging history. Remortgage transactions rose to their highest level in eight years as homeowners took advantage of continued low rates and the opportunity to lower monthly repayments.
However, February also fired a warning shot. Affordability worsened, more homeowners expect rates to rise and more are prepared to wait longer to remortgage again. Caution may well set in once again.
Meanwhile, inflation has risen to 2.3% and real wages are starting to fall. The consequence: homeowners will have less in their pockets come the end of the month. Remortgaging can help alleviate a potentially difficult financial situation, for example, one-in-five reduced their monthly repayments by remortgaging in February.
With the macroeconomic climate expected to be more precarious from March onwards, homeowners would be wise to take advantage of current conditions and remortgage now – before it’s too late.”
