Remortgage levels down as homeowners stay put

Mortgage brokers are reporting falling levels of remortgage business as homeowners choose to stay on their lenders' reversion rates to take advantage of low interest rates, research from Paragon Mortgages has revealed.

Brokers reported that remortgage business accounted for 49% of business in the first quarter of 2009, down significantly from 61% in the final quarter of last year. Bank of England Bank Rates fell dramatically in the period, dropping from 5% in September 2008 to 0.5% by the end of March 2009.

Borrowers have been staying with their existing lender when they come to the end of an introductory deal rather than moving to another fixed or variable rate or to another lender. As a result of the decrease, the proportion of business from first-time buyers has risen for the first time since March 2007, accounting for 7.6% of business. This is up from 5.8% in the previous quarter.

According to Paragon’s Fact report, a panel survey of mortgage intermediaries, next time buyer numbers were also up, accounting for 18% of business compared with 15% in the fourth quarter of 2008.

John Heron, Paragon Mortgages’ managing director, said: “Borrowers coming off introductory deals are enjoying historically low rates following the steep reduction in Bank Rate and are happy to stay on the lender’s variable rate which is most often linked to Bank Rate. However, we may see more borrowers becoming interested in switching to a fixed-rate deal instead over the coming months as anticipation grows of rate increases in the future.”