Remortgages set for resurgence

October 2014

Remortgages set for resurgence

The remortgage market switched off in recent years plummeting from 1.2m cases in 2007 to a low of 350,000 in 2010, followed by a very slow recovery. Many people have been stuck with negative equity whilst others have been trapped by lack of employment. Although 2m borrowers have been able to switch in the last 5 years many have seen no need to do so as their current rates offered no incentive to move from pre-2008 tracker deals. When these silent prisoners wake up it will lead to a remortgage resurgence of some magnitude.

A report by the Mortgage Advice Bureau identifies three dormant borrower groups that explains the recent lull in remortgage transactions. The first covers customers who would welcome a better deal but are unable to access a mortgage due to the stricter lending conditions, particularly affecting those with negative equity and reduced hours of work. The second consists of around 2.8m borrowers who are paying a historic rate which is better than those currently available whilst the third dormant group comprises around 4.4m "stay putters" who could benefit from remortgaging but have not yet bothered to do so. The expected imminent rise in interest rates will be the touch paper to start the surge.

An Expansive Market

After years of being in the doldrums the market is now set for a resurgence of interest from consumers looking to re-assess their existing mortgage arrangements. Although lending criteria has tightened there is now increased competition amongst lenders to offer the best deals in anticipation of the market growth. Recovering house prices means that borrowers have more equity to seek to secure more favourable terms before the exceptionally low interest rates are gone forever. The expectation is that the remortgage market is set to hit £80 billion by 2016.