Why Re-Mortgages Have Dropped 70%

A statistic from a web site I was reading regarding mortgages leapt out at me today and it’s this;

There has been a 70% drop off in re-mortgages in the last couple of years.

I’ve seen many articles on the state of the market regarding mortgages in particular, and none of them tell the full facts.

( Usually this is due to the site having a particular bias in one way or another.)

So why then has this end of the market declined so drastically?

Why Remortgage Anyway?

Generally there are a few reasons why people choose to remortgage;

• when the fixed or introductory tracker or discounted rate on your mortgage ends
• when a better product is launched which is cheaper for the borrower
• when you wish to raise further capital to invest in the property for improvements etc

Why The Big Drop In Numbers Then?

Well, there are several factors which are;

• rates on new deals have been more expensive
• borrowers have been required to put down larger deposits
• banks have a shortage of funds
• banks and building societies have been cherry picking who to lend too
• banks are now charging much higher fees
• your current SVR is lower than the rates available on new mortgage products
• there are not enough good new mortgage products worth moving to when fees are factored in
• new mortgage rates are SVR plus a % on top (makes potentially very expensive for borrower when rates rise)

In short, there is no way to move when there is no better product to go to, or no way to raise capital if the value of the asset is mortgaged on a high loan to value rate. Effectively this is stalemate. Personally, I would like  to see a clamp down on banks being allowed to set their own SVR at more than 1% over Bank Of England base rate. Barclays even set their own base rate too!

This practice is stifling the market and proves that banks dont wish to lend unless they are fleecing the customer every which way they can. A simple fact is, if you have no equity then you cannot remortgage. If property prices have gone down in your area, and your asset is worth less than it was- coupled with the fact that you have a high Loan to Value percentage (LTV), remortgaging is a no go.

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