Banks reveal dip in remortgaging

24/06/11

By Kevin Dixon

The prospect of continued record-low interest rates has prompted a big decline in remortgaging activity, Britain's banks report.

Economists are now predicting that the Bank of England could keep the base rate at 0.5 per cent until next spring.

The British Bankers' Association (BBA), whose members are responsible for two-thirds of UK mortgage lending, said there were 21,519 approvals for remortgages in May - well down on the average of 24,571 for the previous six months.

There was encouragement for home buyers, as house purchase approvals increased in April to 30,509, although the figure is still 15 per cent lower than a year ago. The average sale value of £147,700 was 1.9 per cent lower compared to May 2010.

Many homeowners sought fixed-rate mortgages earlier this year amid expectations of an imminent hike in the base rate. However, recent economic uncertainty has led to experts ruling out a rise.

The BBA said gross mortgage lending was largely stable but, with homeowners stepping up repayments amid the low interest rate environment, net mortgage lending increased by just £1.2 billion in May.