This beats an annual rise of 12% in purchase applications as existing homeowners take advantage of the growing equity in their homes and record-low mortgage rates.
With average house prices across the market rising 10% annually, existing homeowners also benefitted from improved housing equity in January when they remortgaged. MAB’s National Mortgage Index shows the typical applicant put forward £133,719 of equity: 2% more than December (£131,423) and 14% more than in January 2014 (£117,345).
As a result, remortgage applicants are seeking lower loan-to-value (LTV) deals. The average remortgage LTV was 54.9% in January, compared to 55.5% in the previous month and 57.1% this time last year.
This puts them in a stronger position to take advantage of some of the better deals currently available on the market. According to Moneyfacts, average mortgage rates continued to fall across the board in January for a fifth consecutive month.
Rate cuts are making remortgaging a more attractive prospect for borrowers, particularly those who are currently on their lender’s standard variable rate (SVR).
Based on January’s average remortgage loan of £162,590 and a typical SVR of 4.48%, borrowers on this rate would pay £1,027 per month if they had 20 years left on their loan. But by switching to the average two-year fixed rate (3.19%), they would slash their monthly repayments to £917 and save £1,320 a year.
By remortgaging from the average SVR to the average two-year tracker at 2.16%, their monthly repayments would fall even further to £835. This gives an annual saving of £2,304: equivalent to a 4.8% pay rise on the average gross salary. This is double the latest rate of annual wage growth (2.4%) according to the Office of National Statistics.
Brian Murphy (pictured), head of mortgage lending at Mortgage Advice Bureau, said: “Remortgage activity fell behind last year as borrowers were placated by further delays to the base rate rise and lacked an opportunity or incentive to change their current deal. However, many people will find they could benefit from significant monthly savings by moving from their current product: particularly those who are on inflated SVRs.
“The current price war has been intensified by fierce lender competition and a number of new entrants to the market. Specialist lenders are now going head-to-head with traditional competitors and eye-catching product launches have become commonplace, giving rise to historically low rates.”
