The latest mortgage index from John Charcol confirms the recent trend which has been a major factor in the ongoing boost to remortgage activity, according to Ray Boulger, senior technical manager at John Charcol.
Commenting, Boulger said: “With this month’s John Charcol Index we have included figures for the 2009 and 2010 calendar years. These show that in 2010 purchase business increased to 54.2% from 2009’s 48.0%, but a close look at the monthly figures shows that the pretty steady increase from the floor of 31.8% in February 2009 peaked in July 2010 and is currently hovering around the 45% level. The low point in February 2009 also marked the most recent low point of the real Nationwide House Price Index and the peak of 52.1% in July last year was just one month after last’s peak for that index, suggesting a close correlation.
“However, it is not quite as simple as that because remortgage activity started to improve in the second half of last year as increasing numbers of borrowers started to get nervous about an increase in interest rates. People are not likely to remortgage if they anticipate moving within a few months and so the low level of activity in the housing market is another factor likely to continue influencing the remortgage market, although we estimate that for at least a third of all borrowers a remortgage is out of the question, either because of insufficient equity in their property or because they can no longer meet lenders’ much tougher criteria.
“After peaking at 81.4% in April 2009 the proportion of John Charcol clients taking a fixed rate started collapsing in August 2009, when it became increasing obvious that Bank Rate would have to remain very low for an extended period and we advised most clients that tracker rates offered the best value. March 2010 marked the lowest proportion of our clients buying a fixed rate, just 17.0%, since when there has been a slow but steady increase, with a rapid acceleration in the first 2 months of this year to February’s 55.4%, following heightened speculation about Bank Rate increases.
“Over 2010 as a whole only 25.6% of John Charcol clients chose a fixed rate, well under half the proportion in 2009. We expect this percentage to peak at around the current level in the mid 50s because after the recent sharp rise in the cost of 5 year fixed rates their attraction has diminished. If the economy remains weak, as looks likely, we think there will be better opportunities to buy a fixed rate later this year, or next year. With 5 year fixed rates now starting at around 4.5%, nearly 1% higher than the best rates available at the end of last year, borrowers wanting to fix but who have missed the boat should consider waiting for rates to fall back.
“Everyone’s situation is different, in particular where one is starting from in terms of the current pay rate, and so getting individual, personalised, independent advice is more important than ever.”
