Homeowners looking to remortgage, CML says

Image caption The mortgage market has had a slow start to the year, figures have shown

Expectations of interest rate increases led to larger numbers of homeowners remortgaging in March, UK lenders say.

There were 33,900 remortgage loans advanced during the month - up 16% compared with the previous month, the Council of Mortgage Lenders (CML) said.

The figure is 17% higher than the same month a year ago.

Home loans for house purchases also proved to be more popular, although the lenders' body said the market remained "subdued".

The number of these loans was up 24% compared with the previous month. However, it was 17% down on March 2010, and the CML warned against reading too much into one month's figures.

"We saw a significant increase in both house purchase and remortgage lending in March but, over the first quarter of the year as a whole, the picture was subdued and that is unlikely to change for the foreseeable future," said CML director general Michael Coogan.

He said that the string of bank holidays could have affected mortgage market activity since March.

Rate guessing

Remortgaging accounted for 37% of all lending during the first three months, up from 30% during the previous quarter.

The CML said it was likely that this was linked to expectations of an interest rate rise in the coming months, making mortgages more expensive, even if this increase was only small.

The number of home loans made in March to first-time buyers was 28% higher than in February, but 17% lower than a year earlier.

Typically, buyers now have to provide a 21% deposit to get on the property ladder for the first time. This is a little less difficult than the 24% typical deposit required a year ago, the CML figures show.

Only 4% of first-time buyers now choose an interest-only mortgage compared with 30% before the financial crisis, when these loans were much more available from lenders.

This has meant buyers have be forced to save up before buying a home which, in turn, has pushed up the cost of renting, according to Jonathan Moore, director of flatsharing website

"The rental sector is groaning under the strain of the influx of frustrated buyers," he said.

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