The balance between house purchase and remortgage lending tipped towards remortgaging at the start of 2011, according to the Council of Mortgage Lenders. Remortgaging accounted for 37% of all lending in the quarter, an increase from 30% in the last quarter of 2010.
The number of loans advanced for house purchase in March increased by 24% to 37,800 from February, and the value increased by 26% to £5.4billion. While this is a significant increase compared to the start of the year, house purchase lending activity is still below the levels seen at the same time last year - down 17% in volume and 16% in value.
There were 33,900 loans for remortgage, worth £4.1billion, advanced in March, up 16% by volume and 17% by value compared to February and up 17% by volume and 13% by value compared with March 2010.
Looking at the first quarter as a whole, house purchase lending was down 26% by volume and 27% by value from the last quarter of 2010. Remortgage lending was up 14% by volume and 11% by value from the fourth quarter.
The increase in remortgage activity is likely linked to the expectations of an increase in interest rates.
Although any significant rise in rates is unlikely, recent increased sentiment in favour of remortgaging looks set to be reflected in a strengthening of remortgage lending over the next few months,
The number of mortgages to both first-time buyers and home-movers fell on a quarterly basis. First-time buyers fell 23% and home movers 28%.
CML director general Michael Coogan said: "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.
"Looking ahead to lending figures in the coming months, the Easter, royal wedding and May bank holidays will impact on the level of activity, timing and spread of completions in the second quarter meaning that any one month's data should not be interpreted as a reflection of a trend. It may take until publication of the second quarter's activity to get a full understanding of how the market has reacted to the squeeze on household incomes."
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