Loans for new purchases slump by 40 per cent
Sunday 01 June 2008
Further evidence has emerged of the torpor in the mortgage market. The British Bankers' Association (BBA) has reported that the number of new loans taken out to purchase a property in April was down 39.4 per cent on the same month a year ago.
This reflects the continuing problems experienced by buyers in securing a mortgage, as well as the general slump in housing market activity.
The BBA's figures did, though, reveal a slight rise in the number of people remortgaging. There are two main reasons for this. First, an estimated 116,000 people are coming to the end of their fixed-rate mortgage each month and finding that their repayments are about to go up. So they are looking to move to another lender.
Second, Northern Rock customers nearing the end of their mortgage tie-in are also keen to switch to a different lender as the Rock's standard variable rate (SVR) is very high.
However, despite this uptick in remortgaging, it seems that many consumers are still choosing to do nothing even when it means paying over the odds for their loan.
Research from the Abbey has found that roughly half of all mortgage borrowers stay with their current lender even when they are shunted from a preferential rate on to a much higher SVR.
Phil Cliff, Abbey's mortgages spokesman, said that borrowers were missing a trick by not switching.
"When people move home, they tend to spend a lot of time looking for the right house but not necessarily the right mortgage," he explained.
"However, at a time when the mortgage market is changing rapidly, it is important to look around to make sure you're getting the best deal."
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