During May, the first full month of business following the MMR, the volume of remortgage lending fell to £3.3bn. This is 17% lower than the previous month and 15% down compared to last year.
This figure represents the worst month for remortgage lending since March 2013. The number of remortgage loans dropped by a fifth month-on-month, falling to 21,396.
LMS chief executive Andy Knee said both the additional requirements caused by the Mortgage Market Review and higher interest rates had caused the slump.
“Remortgaging continues to lead the market slowdown as lenders tighten their lending criteria, pre-empting any government cap to tackle concerns about an overheated mortgage market,” he said.
“In some cases customers have been put off by the less competitive rates now on offer, as lenders raise rates to give themselves some breathing space as they get to grips with MMR.
“We expect remortgage lending to recover strongly in the months ahead when lenders fully adjust to the system, rates improve and a base rate rise finally happens. In fact some lenders have already reported increased enquiries to switch following Mark Carney’s comments last week.
“That the average amount of equity being released through remortgaging saw a 44% increase since last month – the highest figure since November last year – indicates that household finances are still under pressure. But a welcome respite can be seen with inflation falling to a four-year low which should begin to ease pressures on the purse-strings.”
These figures mean the remortgage market now accounts for 20% of the total market, down from 26% in May last year.
