June CPD Newsbrief — Mortgages
Brokers predict remortgage boom thanks to SVRs
Brokers are forecasting an upswing in the remortgage market by the end of this year, as two thirds of homeowners currently find themselves on higher standard variable rates (SVRs).
Data from the Council of Mortgage Lenders shows that the proportion of outstanding mortgage balances held by customers on SVRs has jumped from 49% in the second quarter of 2007 up to 67% in Q2 2014 — illustrating the steep decline in remortgages since the height of the UK property boom.
Figures provided by Moneyfacts.co.uk show a steady increase in average SVRs over the past five years, rising from 4.61% in May 2009 to 4.88% as of 16 May 2014. Borrowers are reverted to these rates at the end of their fixed term, leaving them with much higher monthly payments. While many borrowers find themselves unable to move to another product or remortgage because of negative equity or rising loan-to-value requirements, brokers say the majority of existing homeowners currently on SVRs will look to re-fix before the Bank of England’s expected base rate increase in early 2015.
In addition to MMR delays and the significant number of borrowers currently on SVRs, London & Country associate director of communications David Hollingworth believes an increase in base rate and rising house prices will also lead customers to seek lower rates while they can.
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