• Average net equity released is £20,219 per household, up by 10% from August 2013
• Annual remortgage payments as a percentage of income drop to lowest since start of the year as wages improve for second consecutive month
• But value of remortgaging down 1% on last month and 8% on last year as effects of tighter credit regulation still felt
Latest figures from LMS reveal that monthly gross remortgage lending saw a monthly decrease of 1% in August to £3.87bn, down from the £3.9bn in July reported by the Council for Mortgage Lenders (CML).
LMS estimates that the number of remortgage loans also fell by 1% to 24,863 in August. This figure is also down 8% from this time last year; when there were 27,100 remortgage loans recorded. Tighter regulations have dissuaded homeowners from remortgaging over the last year.
The average remortgage loan has fallen to £155,589 – a 3% decrease from last month but this is 4% higher than the average loan of £149,367 in August 2013.
According to CML data, the average mortgage interest rate increased to 3.2% in July, the highest rate since June 2013. However, the average monthly household income for all new mortgages also rose by 4.9% in July, to an average income of £46,145. July's average income is also 5.9% higher than this time last year as wages saw growth for the second month in a row.
Based on this, LMS calculations show that annual remortgage repayments account for more than a fifth (20.3%) of household income – but is the lowest amount since the start of year (January) – and notably lower than last month when they accounted for 21.7%.
This remains notably lower than the typical rate for a new purchase mortgage, which has a rate of currently 22.2%. The difference between purchase mortgage and remortgage annual repayment as a percentage of income is the largest it has been (1.87%) for a year (July 2013).
Commenting on the latest figures, Andy Knee, Chief Executive of LMS says:
"The hangover from MMR accounts for lower remortgage volumes, as those who could remortgage for a better rate or to reduce monthly payments are put off by the time-consuming and intrusive checking process.
"However, as the process is fine-tuned, affordability will come down, lender appetite will return and the arrival of highly competitive rates towards the end of the year will encourage more remortgage activity, to offer excellent long-term fix opportunities.
"House price increases have also put people in a better position to remortgage, raising the amount of equity they have – and in some cases taking people out of negative equity caused by the crash – allowing them to withdraw more equity through remortgaging without increasing the size of their LTV.
"Rising incomes, recorded by CML for the second month in a row, coupled with the entrance of more competitive remortgage rates mean that repayment as a percentage of income is now at its lowest amount since the start of the year – great news for customers considering remortgaging.
"Even with an interest rate rise anticipated for the Spring of next year, Carney's insistence that it will be slow and gradual means that competitive rates will persist, and customers will keep their affordability intact – something critical to all those that have found their purse-strings stretched over the past few years."