A record proportion of homeowners stuck with their existing lender to remortgage in April amid rising rates, according to industry figures.
Nearly nine in 10 (88%) residential remortgage deals in April were done with the borrower’s existing lender, marking a high in UK Finance’s records going back to the start of 2018.
By June, the latest month for which figures are available, the proportion remortgaging with their existing lender had fallen back to 84%.
In general, existing mortgage holders wanting to borrow more money or to switch to a different lender would need to undergo another affordability test.
Sharp rises in mortgage rates in recent months will have left some homeowners with a bill shock when they are looking around for a new deal.
Circumstances can change, so if anyone is struggling with their mortgage payments, they should reach out to their lender who will have a range of tailored support available to help— Eric Leenders, UK Finance
However, there have been some signs of fixed mortgage rates edging down slightly in recent weeks, with several major lenders announcing reductions.
UK Finance’s household finance review for the second quarter of this year said: “Affordability constraints impacted some external remortgaging activity and resulted in internal product transfers being more popular.”
It said that 84% of remortgaging deals in the second quarter were “internal product transfers”.
By comparison, the average for 2022 as a whole was around 77%, the report said.
Many lenders have signed up to a mortgage charter, giving borrowers certain options if they are struggling with their mortgage costs. They include, for example, allowing those who are up-to-date with their payments to switch to interest-only payments for six months or extend their mortgage term, giving customers the option to revert to their original term within six months by contacting their lender.
Toughened mortgage lending rules were previously introduced following the financial crisis, to guard against the risks of borrowers being offered deals that may later turn out to be unaffordable.
UK Finance said that it had conducted analysis on borrowers who refinanced internally this year, looking at their new rate compared to the rates they were assessed against for affordability purposes, when they took out their previous mortgage.
The report said that “while there are significant pressures on household finances at the moment, customers will typically retain a decent level of wiggle room in their budgets after refinancing”.
UK Finance said the analysis showed “that the underwriting standards operated by the mortgage industry and enshrined in FCA (Financial Conduct Authority) rules since 2014 are doing the job they were designed for, ensuring customers’ finances are resilient against even the significant payment shock many are now seeing”.
Eric Leenders, managing director of personal finance at UK Finance, said around 700,000 borrowers have come off their fixed-rate deal in the first half of this year and are likely found themselves on a much higher rate.
But these continue to be largely affordable, he said “because of the ‘stress tests’ applied when the mortgage was originally taken out.
“But circumstances can change, so if anyone is struggling with their mortgage payments, they should reach out to their lender who will have a range of tailored support available to help.”
UK Finance also released analysis into mortgage borrowing among over-55s, which found 30,400 new loans were advanced to older borrowers in the second quarter, down 38.5% year on year.
The value of this lending was £4.3 billion, which was down 45.7% compared with the same quarter a year previously.
