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Remortgaging levels set to rise as lenders change SVRs

by: Mortgage Solutions
  • 08/02/2010
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Remortgaging activity could be set to rise, with increasing standard variable rates (SVRs), cheaper rates and fears of increases all putting pressure on borrowers to consider changing their homeloan.

London-based broker John Charcol said that anyone paying an SVR of at least 3.5%, or about to revert to one, should consider a remortgage if they have at least 20% equity in their property, which could spark a reversal of last year’s trend which saw remortgaging activity fall steadily.

Ray Boulger, senior technical manger of John Charcol, said: “Assuming property prices continue to rise, even only gently, the number of borrowers with sufficient equity will steadily increase, making a remortgage progressively worthwhile for more people. For this reason, I expect the dramatic fall in the volume of remortgaging to be close to end and to see a slow increase in remortgage activity this year.

“With interest rates likely to remain low for some time we continue to recommend trackers to most clients, but for those wanting a fixed rate, five-year fixes around 5% generally look more attractive than the cheaper two- to three-year fixes as these only provide interest rate protection for a short period.”

Mike Fitzgerald, sales director of The Emba Group, said that with SVRs rising because of Government capital requirements, remortgaging activity was on the rise once again.

He added: “Borrowers on trackers realise that the party cannot go on forever and that the Bank base rate will only be headed in one direction once it does eventually change. Borrowers are hoping to take control of their mortgages again, and after being almost nonexistent last year, remortgaging levels are on the up.”

Skipton Building Society hit the headlines recently by hiking its SVR and Halifax has garnered attention for its decision to no longer allow existing borrowers moving home to port their SVR mortgage with them, forcing them to remortgage.

Melanie Bien, director at Savills Private Finance, said: “With interest rates staying low for such a long time, lenders are keen to get borrowers away from super-cheap SVRs which do not earn them much money.

“Preventing borrowers from porting their SVR may therefore be understandable from the lender’s point of view, but it is very annoying for the borrower, particularly if they do not have much equity in their home, so their mortgage options are limited. Borrowers should speak to a broker to see what options are available to them.”

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