Lenders express remortgaging concerns

04/06/2009

Low remortgaging rates can be explained by moves from the Bank of England and borrowers' own worries in the recession.

The Council of Mortgage Lenders (CML) said that more and more homeowners are choosing not to remortgage and are instead going on to the lender's Standard Variable Rate (SVR).

This is due in part to the fact that the Bank of England has cut its lending rate to a record low of 0.5 per cent, meaning that SVRs are lower than usual.

The analysis also suggests that many people are worried that they won't "fulfil [the] criteria" of their lenders in the present financial downturn.

According to the association's own figures, repossessions will almost double from 40,000 to 75,000 this year as the effects of the recession limits people's ability to repay their mortgages.

Sue Anderson, head of member and external relations at the CML, said: "Remortgaging is a mixed picture, but for most people if they are coming out of a fixed deal on to an SVR, in many cases that will be a pretty attractive rate compared with the rates on to which they could take a new deal.

"Other people will find that if they have little equity or don't fulfil lender's criteria, then it will be more difficult anyway. The reasons why remortgaging is in decline are not one size fits all; it is a question of different circumstances for different people."

Earlier this week, financial website Moneysupermarket.com showed that the typical SVR offered by a UK lender is over four per cent above the Bank of England base rate - and that the margin between the two rates had increased over recent months.

Tags; Housing Debt and Bills, Young Family Finances,

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