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Remortgage business rockets to 52%

Remortgages now represent more than half of all new lending, according to figures for January from the Council of Mortgage Lenders.

Of the total £18.6bn of advances made last month, £9.6bn or 52 per cent was advanced through remortgages, up from £7.6bn in December or 39 per cent and £5.6bn and 42 per cent in January 2002.

Overall lending jumped 39 per cent in January 2002, when it stood at £13.4bn, although the figure was down by 4 per cent from December&#39s £19.4bn.

Lending for house purchase rose by 12 per cent to £7.5bn in January from £6.7bn in January 2002 but accounted for only 40 per cent of the total, the lowest proportion on record. In January 2002, loans for house purchase represented half of all lending.

The average loan to first-time buyers fell by 10 per cent to £78,500 in January from £87,000 in December. The CML says although one month&#39s figures should be treated with caution this may signify a slowdown in activity among first-time buyers.

Borrowers turned slightly from fixed to variable rates in January, with 33 per cent taking fixed rates and 67 per cent choosing variable rates, compared with 35 per cent taking fixed and 65 per cent choosing variable rates in December.

The average interest rate across all mortgages fell to 4.68 per cent in January 2003 from 4.39 per cent in January 2002, even though the Bank of England base rate remained at 4 per cent throughout the period.

CML director general Michael Coogan says: “These figures reinforce our view that affordability constraints will affect the market and cause a gentle slowdown. This now appears to be beginning. The phenomenal rise in remortgaging reflects both the attractiveness of the refinancing deals available and also the continuing appetite among consumers for equity withdrawal.”

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