Clock ticking on cheaper mortgage deals
The housing market is heating up once more as a wave of home owners look to snap up cheap re-mortgage deals before they disappear.
Some 44,488 mortgages with a total value of £7.7 billion were approved for house purchase in June, marking the highest monthly figure recorded since March 2014, according to the British Bankers' Association (BBA).
Meanwhile, the body said it has also seen an increase in the number of people re-mortgaging, which could be due to borrowers wanting to snap up cheap fixed-rate mortgage deals ahead of a possible rise in interest rates.
The number of re-mortgage approvals has leapt by around one fifth (20%) compared with a year ago, with 23,985 re-mortgage approvals with a total value of £4 billion recorded in June.
The housing market recovery took off strongly in early 2014, but there were signs of a slowdown in the second half of last year after stricter mortgage lending rules were introduced to make sure mortgage applicants could truly afford to pay back their loans.
However, in recent months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.
Some experts believe these ultra-low rates may not be around for much longer. Earlier this month, Bank of England governor Mark Carney suggested that the base rate could start to increase from its 0.5% low around the turn of this year.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "The real growth in lending has been on the re-mortgaging side, with borrowers keen to snap up a cheap fixed-rate mortgage.
"With Mark Carney's recent comments about a potential rate rise at the turn of the year, we expect to see significant growth in the number of people re-mortgaging in coming months."
Mr Harris said that swap rates, which are used to price loans, have been climbing, meaning that "the pricing of fixed-rate mortgages will inevitably rise".
He continued: "Anecdotally, the first rate rise is the trigger point for many people re-mortgaging but it may even be the second or third increase, as that is when there is a significant impact on a households' expenditure and people then re-mortgage to 'save' money. However, by then the best fixed rates will have long gone."
Charlotte Nelson, a finance expert at Moneyfacts.co.uk, said that the average two-year fixed rate mortgage on the market has fallen from 3.67% a year ago to 2.75%.
She continued: "However, with Mark Carney's announcement that base rate is likely to rise in the near future, these low rates will not be around for long.
"Borrowers still sitting on their SVR (standard variable rate) or coming to the end of a fixed mortgage deal need to act fast to secure a low rate."
The BBA also said that lending to larger companies remains subdued. Companies' net borrowing reduced by £4.8 billion in June.
Richard Woolhouse, chief economist at the BBA, said: "The housing market is beginning to hot up again, with a pick-up in the number of mortgage approvals for the last month.
"Interestingly, we've also seen an increase in the number of people re-mortgaging, which could be down to savvy borrowers taking advantage of competitive deals on fixed-rate mortgages ahead of a possible rise in interest rates.
"Lending to some business sectors continues to show good results, although in the case of real estate, banks are being cautious as they try to refinance bad loans."
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