"The popularity of product transfers has gone through the roof, which explains why net approvals for remortgaging, which only capture remortgaging with a different lender, went through the floor."
Net residential mortgage borrowing increased for the fourth consecutive month to £1.2 billion in August, up from £0.2 billion in July, the latest Money and Credit statistics from the Bank of England show.
The figures show that gross lending rose from £19.1 billion in July to £19.7 billion in August, while gross repayments were little changed at £18.9 billion in August.
However, net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August, the lowest level in six months.
Approvals for remortgaging with a different lender saw a significant decline from 39,300 in July to 25,000 in August, the lowest since July 2012 (24,400).
The ‘effective’ interest rate paid on newly drawn mortgages saw a 16 basis point increase to 4.82% in August, before the Bank of England's Monetary Policy Committee voted to maintain Bank Rate at 5.25%.
Speaking via Newspage, Darryl Dhoffer, founder of The Mortgage Expert, said: "As these figures highlight, mortgage activity in August was frankly dreadful and September hasn't seen much of an improvement, despite the fact mortgage rates have been coming down. Many people are sitting on their hands amid the economic uncertainty and the result is a barren property market. I expect this trend to continue until we see further holds in the Bank of England base rate and, better still, for it to start coming down. The fact remortgage levels were down so sharply reflects the fact that more people are doing product transfers as they have no other choice for affordability reasons."
Justin Moy, founder at EHF Mortgages, commented: “The popularity of product transfers has gone through the roof, which explains why net approvals for remortgaging, which only capture remortgaging with a different lender, went through the floor. Product transfers are less faff and involve less underwriting, which for many borrowers is key right now. While the purchase market has cooled overall, we have seen a good number of first-time buyers looking to buy. Falling property prices are helping drive this, along with the high rental costs in the South East, and even with higher mortgage rates, the monthly cost is similar, if not cheaper. The vast majority of our applications are still Product Transfers and remortgages and, with rates reducing, we are spending time grabbing cheaper deals for those who made early decisions to reserve. Let's see if the markets settle this side of Christmas, or if we see another bounce and increases."
Steven Hargreaves, mortgage adviser at The Mortgage Co, added: “Based on our experience and speaking to other mortgage brokers and lenders, it was no surprise the August figures were at a six-month low. August is a holiday period, meaning lending ordinarily dips, but August 2023 felt particularly quiet. We are hoping that, with the interest rate war now raging, we can catch up in the autumn for the lower-than-average activity levels over the summer. The way in which lenders are now pricing their products and interest rates suggests they are hoping for the same."
