Remortgage lending fell 17 per cent to £3.3 billion last month, says a new report, down from the £4 billion in April reported by the Council for Mortgage Lenders.
The figures from Legal Marketing Services show the level is also down 15 per cent from last year, representing the smallest total since March 2013 which the report says provides 'further evidence of a cooling mortgage market across the UK'.
A report from the British Bankers Association also showed the overall number of mortgages approved by banks fell in May for the fourth consecutive month and down 3.5 per cent on the May figure for last year. Its chief economist Richard Woolhouse said that 'the heat appears to be coming out of the housing market'.
LMS also estimates that the number of remortgage loans fell by 19 per cent to 21,396 in May, down by more than a quarter compared to this time last year. On top of this, the average remortgage loan amount has also dropped to £155,448, a three per cent drop from last month. This is the first fall since October last year though still seven per cent higher than May 2013.
"Remortgaging continues to lead the market slowdown as lenders tighten their lending criteria, pre-empting any government cap to tackle concerns about an overheated mortgage market," said Andy Knee, Chief Executive of LMS.
"In some cases customers have been put off by the less competitive rates now on offer, as lenders raise rates to give themselves some breathing space as they get to grips with MMR. We expect remortgage lending to recover strongly in the months ahead when lenders fully adjust to the system, rates improve and a base rate rise finally happens."
Earlier in the week the Bank of England Credit Conditions survey indicated that demand for mortgages for house purchases had increased 'significantly' in the last three months, with lenders expecting a further rise in demand over the next three.
"This contradicts some other indices which suggest that the housing market is taking a breath," said Jonathan Harris, director of mortgage broker Anderson Harris. "Demand is still strong as buyers remain confident of their ability to get a mortgage and their perception that now is a good time to buy, with more stock coming onto the market."
According to Halifax, five year mortgages are becoming increasingly popular. More than two thirds of fixed rate mortgages in 2013 were for two year deals, but fixed rate mortgages for four to nine years, were the next highest (of which five year mortgages are most popular) and now account for a third of all fixed rate mortgages sales, up from just over a fifth in 2008.Reuse content