Bank of England figures showed remortgaging accounted for almost one in three loans approved last month as more people were given the go-ahead to switch than at any point since January 2014.
Annual growth in bank lending also eased from 2.6% in April to 2.2%.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Today’s figures show that the remortgage market has sprung into life over the last year.
“Low rates and rising house prices are giving many homeowners a stronger incentive to switch their loan than they have had for years.
“The best prices are available to borrowers with the most equity in their homes, so it is a logical step for people to look closely at how much value their property has gained in recent years and see whether this throws the door open to a cheaper deal.
Some homeowners will appreciate the chance to take cash out of their home, while others will simply find the cost of switching is outweighed by the benefits of lower repayments.”
Samuel Tombs, senior UK economist at Capital Economics, said: “The weakening of UK bank lending growth in May is likely to be just a blip in an improving trend, now that the banking sector has a better bill of health and consumers are feeling more confident.
“The lull in mortgage approvals in May might have partly reflected concerns about the potential outcome of the general election.
Indeed, housing demand seems to have picked up immediately after the election – the new buyer enquiries balance of the RICS Housing Market Survey reached its highest level in over a year in May.
Moreover, with mortgage rates at record lows, unemployment close to pre-recession levels and earnings growth finally picking up, the conditions are in place for a further revival in demand for home loans.
So, while the Mortgage Market Review regulations and the Financial Policy Committee’s restraints on high loan-to-income lending will prevent a major increase in supply of secured credit, we still think that credit flows will continue to recover in the second half of this year.”
