Remortgaging continues to grow in popularity, according to our latest consumer survey. But while customers are increasingly prepared to change their lender, they prefer to make any new arrangements through traditional channels – the overwhelming majority of borrowers like a face-to-face meeting to arrange their mortgage.
The continuing popularity of remortgaging is reinforced by the statistic showing that six in 10 have arranged their current mortgage within the last five years. A third of borrowers have either changed lender, renegotiated the terms of their mortgage or increased the amount borrowed without buying a new property – and the numbers doing so were higher in 2002 than they were in the previous year.
When arranging a mortgage, the majority (55 per cent) of borrowers make their first approach directly to a lender, with a quarter (27 per cent) going through an independent financial adviser. Almost four-fifths choose a face-to-face meeting, either in the branch or at home or work, with 12 per cent preferring to arrange their mortgage on the telephone.
But only a very small percentage of customers use the internet to contact a lender. Only nine people out of more than 1,000 surveyed in 2002 had done so, compared with eight in 2001 and two in 2000. Digital television is even less popular, with just two out of more than 1,000 choosing this option.
Interest rates continue to have the biggest influence on the choice of a mortgage (30 per cent), followed by advice from a professional(27 per cent). Other important considerations are the convenience of branch location and the ability to borrow the amount required (both 15 per cent), discounted rates (13 per cent), holding another type of account with the lender(12 per cent) and previously having held a mortgage there (10 per cent).
Significantly, the stock of mortgages linked to endowment policies continues to fall. Repayment mortgages are now the most popular choice, accounting for 58 per cent of the stock of loans, compared with 48 per cent in 2001 and 40 per cent the year before. But as recently as 2000, endowments were the preferred repayment vehicle for most borrowers, with 57 per cent of mortgages linked to them. By last year, however, this figure had dropped to 39 per cent.
The extent to which borrowers are protected by insurance varies enormously. Almost one-fifth (18 per cent) had some type of personal health cover, while 22 per cent had critical illness insurance. Perhaps not surprisingly, those in professional and managerial positions and on higher incomes were more likely to have this type of cover.
Nearly one-third (31 per cent) of borrowers believed they had insurance to cover their mortgage payments if they became ill, had an accident or lost their job – the same proportion as in 2001.
But joint figures from lenders and insurers show that take-up of mortgage payment protection insurance actually extends to just over 22 per cent of borrowers. So there seems to be a problem with people identifying and distinguishing between some of the insurance policies they have.
Levels of satisfaction with lenders remain high, with 86 per cent either very or fairly satisfied (89 per cent in 2001). And a large majority of people continue to want to be home-owners. More than seven in 10 (72 per cent) would most like to be living in their own property in two years' time. Looking 10 years ahead, this figure rises to 78 per cent. But it is significantly lower (40 per cent) among those aged 16 to 25, perhaps because owning a home is simply unrealistic for many people of that age.
Just over one-in-four (27 per cent) households used up to a quarter of their income to repay debts, including their mortgage.
A further 15 per cent used between a quarter and half of their income paying debts. One-third (32 per cent) said paying their debts was OK while a further 16 per cent found it easy and 36 per cent had no debts.
Five per cent said that they sometimes fell behind with their debts and – perhaps not surprisingly – these figures were higher among the unemployed (14 per cent), households with incomes of under £17,499 (9 per cent) and parents (9 per cent).
Just over a quarter (27 per cent) said their level of debt was the same as last year, while 16 per cent had reduced their debts and 11 per cent owed more. Asked how they felt about debts, 34 per cent said they were not a problem, while 15 per cent worried occasionally about them. Four in 10 had no debts and only 3 per cent said they worried about debts most of the time.
Half of homeowners knew nothing at all about equity release schemes and one-fifth (21 per cent) had never even heard of them. Only 4 per cent knew a lot about them, although 14 per cent knew a fair amount and 28 per cent a little. But there was more familiarity with equity-release schemes among older home-owners. Nearly a quarter (24 per cent) of those aged 55 or over knew at least a fair amount about them, compared with 14 per cent of homeowners aged 16 to 54.
But only 9 per cent thought it was likely they would use equity release. Almost two-thirds (64 per cent) said it was unlikely, and this proportion was higher still among older home-owners. More than a third (35 per cent) said they did not need the money – among retired people, this figure rose to 44 per cent. Just over one-fifth (21 per cent) said they were wary of equity release and 17 per cent said they wanted to leave something for their family.
One-fifth (19 per cent) of those who might use equity release would spend the money on a holiday. Other popular uses for the funds include home improvements (15 per cent), general daily expenditure (12 per cent), a car (11 per cent) and helping out relatives (10 per cent).
Finally, the survey revealed that 20 per cent of borrowers had a flexible mortgage but only 4 per cent of them had ever used it to take a payment holiday.
The CML survey was conducted by MORI Financial Services between October and December 2002 and involved interviews with 3,206 householders.