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Activity in the mortgage market took a slight dip in November, no doubt fuelled by the base rate rise which has forced homeowners to take stock of their current position and hold off on making key financial decisions. This saw house purchase activity fall to a 15-month low, but remortgaging activity continues to hold its own – and could increase further in the months ahead.
The figures, from UK Finance, show that the number of house purchase approvals fell to 39,507 in November, down 2% from October's total of 40,417 and the lowest seen since August 2016 (38,308). It also marks a drop of 5% over the last year, down from 41,702 in November 2016.
This marked decline in activity is largely the result of the base rate rise that took place during the month, which had a knock-on effect on mortgage rates. Indeed, averages had already begun rising in anticipation of the Bank of England's decision – November seeing the largest rise in two-year mortgage rate on moneyfacts.co.uk's records – so it's little wonder that buyers took a step back from the market.
Remortgaging activity also took a slight downturn, albeit to a lesser extent, with 33,670 remortgages approved during the month, down 1% from October (34,006). Nonetheless, this marks a significant improvement on an annual basis, with November 2016's approval total being 23% lower at just 27,268, highlighting the strength of the remortgage market over the last year.
It's likely that the drop in approvals is merely temporary, at least where remortgaging is concerned, as borrowers adjust to the new base rate environment. Indeed, our own figures suggest that remortgaging activity could ramp up in the months ahead, as although fixed mortgage rates have started to rise, so have standard variable rates (SVRs), which means borrowers now have plenty of incentive to switch to a better deal.
This is because the average SVR has jumped up this month to stand at 4.74%, up from 4.60% in September and the highest seen since September 2016 (4.75%). Meanwhile, the average two-year fixed mortgage rate of two years ago stood at 2.56%, which means those who are coming to the end of that two-year term are now faced with a 2.18% rate hike if they choose to revert, the highest variance seen since April 2008 (2.39%).
Historical data shows that when the jump to the SVR is significant, many borrowers will naturally choose to remortgage instead, so it's likely that remortgaging activity will rise for the foreseeable future. This is particularly likely given that the current average two-year fixed mortgage rate stands at 2.35%, which means the typical borrower could enjoy a 0.21% rate cut if they remortgaged – so why not see if you can benefit? Compare the best mortgage rates and remortgage deals, and see how much you could save.
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