Following the slowdown in number of properties being bought and sold, the remortgage market which has remained firm up until now is also beginning to show signs of a slowdown.
Hometrack, one of the companies that tracks the state of the UK housing market says: ‘The latest Bank of England mortgage data for May shows that the sharp slowdown seen in the house purchase market has started to spread to the remortgage sector. In recent months the remortgage sector has remained firm while the house purchase market has continued to decline. The latest data shows that remortgage lending fell by 10% in May and house purchase recorded a 28% fall in the month.
According to Hometrack, the remortgage sector that has sustained the mortgage market in the last 6-8 months as the house buying market evaporated. ‘If we see a continued erosion in the remortgage market the total mortgage market will experience a very sharp fall in volumes by the end of this year. Total mortgage approvals have fallen by 14% in the latest month and are around 40% lower year on year. House purchase lending is currently 64% lower year on year.’
They continue: ‘Total mortgage debt growth has already slowed from around 15% in 2003 to 8.2% in May 2008. We expect this slowdown to continue to under 5% in 2009 but this requires a continued resilient performance from the remortgage sector to prevent an even sharper downturn.’
Hometrack believe that the UK’s mortgage market is facing its most challenging outlook for over 15 years. ‘The collapse in house purchase activity combined with lower mortgage supply and pricing pressures are compounding to produce a very difficult market for all players.’