Remortgages: Defending a Man’s Castle?

In the present state of the economy, and considering the fragile and tentative recovery that many believe that we are experiencing, the property market is continuing to be frequently used as a barometer of the effects of the recession. While the latest statistics would argue that the United Kingdom is still within the recession and experiencing the effects with more severity than ever, property market experts are reluctant to write off the recent upturn in mortgage lending.

Donna Green examines the divide between the mortgage and remortgage market, considering the impact of the latest news that the sectors of mortgage lending and equity release are on the long road to economic recovery.

The latest news that the division between the mortgage and remortgage lending rates has widened throughout 2009 demonstrates that while some sectors are experiencing a resurgence in economy, others continue to experience the full effects of the downturn. The Director General of Self Home Income Plans, Andrea Rozario, has given an analysis of the equity release market within the property industry, however acknowledged the nature of division evident in recovery.

“While equity release providers are experiencing high levels of customer demand, a significant impact on the quarter's business figures has been the lack of liquidity in the overall market.”

Furthermore, the stagnant characteristics that the markets are currently offering details a difficult set of circumstances under which to make specific financial decisions regarding properties. As previously reported, the record low interest rates set by the Bank of England are allowing many mortgage providers to offer competitive rates on mortgage loans, in many cases eliminating any demand for refinancing or remortgage loans.

In much the same way, the equity release market has suffered with plummeting demand throughout the recession, however can be seen to be tentatively beginning to recover. The statistics released by Self Home Income Plans document a mid-year growth from the statistics available from the start of the year and since the third quarter of 2008, the amount of equity released from properties has risen, further attesting to the assertions within the property market of an economic upturn.

With the recent news on proposed pension reforms, retirement ages and legal action taken against unprofessional pension providers, these figures come as welcome news to those seeking to draw income from the value of their properties. In comparison with the remortgage market, the equity release market can be argued to have fared better throughout the economic turmoil by virtue of the fact that it is not as heavily reliant upon the economy. Whilst equity release is obviously directly linked to house prices, unlike the remortgage market, it is not wholly underpinned by Bank of England interest rates.

Source

Purchase loans up by 77% but remortgages plunge

The number of remortgage approvals plummeted by 60 per cent to 21,282 last month from 52,717 in September 2008, according to figures from the British Bankers’ Association.

House purchase approvals rose by 77 per cent over the same period from 23,808 to 42,088, with £5.9bn of house purchase loans approved in September compared to £3.2bn in the same month last year.Legal & General director of mortgages Ben Thompson says: “The remortgage market is as dead as a dodo, according to the figures from the BBA, and let’s face it, this situation is not going to change much for a long time to come. As long as the bank rate stays this low - and why shouldn’t it given today’s GDP figures? - then there is little incentive for borrowers to shift from their standard variable rate.”

BBA statistics director David Dooks says: “Mortgage lending by the high-street banks is continuing to improve from the lows seen earlier this year and the number of house purchase approvals continues to recover.

“Housing market activity will depend, however, on more properties coming on to the market.”


Source