Remortgage lending is continuing to decline as interest rates remain low, offering little incentive for borrowers to move off their variable rates and sign up for a new deal.
In August, remortgages accounted for 25 per cent of lending, the lowest proportion for 10 years, according to the latest figures from the Council of Mortgage Lenders.
The number of remortgages advanced by lenders was down 13 per cent and the value down 14 per cent compared to July's figures, and both levels were down 19 per cent year-on-year.
The CML predicts that remortgaging will not rise in the coming months; with interest rates expected to remain low, borrowers are happy to stay on their lender's low reversion rate when they come to the end of their mortgage term, while other borrowers are unable to access new deals due to lower loan to values on offer or falling house prices.
Overall, mortgage lending fell in volume by eight per cent in August compared to the previous month, which the CML says is in line with seasonal trends, but shows a promising three per cent rise in volume and 12 per cent rise in value compared to the summer months of 2009.
Commenting on the figures, CML director general Michael Coogan said: "August is a traditionally slow month for mortgage lending and it was no different this year. We expect a quiet market to continue for the foreseeable future. While we do not know what the impact of the comprehensive spending review will be on our sector, it will clearly contain austerity measures that will likely further dampen consumers' appetite to borrow."
He expects lending to slow more significantly for the rest of the year, "and it is unlikely that the uncertain environment will encourage a tick up of mortgage activity in 2011."
Mr Coogan added that the housing market was permanently altered as a result of the recent economic crisis: "With some uncertainty surrounding future house price trends, we would expect a muted market in the next few years," he said. "The problem of excess capital, that led to record lending and borrowing in 2007, has self corrected and will not return."
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