Low interest rates are a lid on remortgaging recovery, CML

Lack of demand from remortgaging homeowners is affecting overall lending levels, according to the Council of Mortgage Lenders.

Data published by the CML for August revealed that while house purchase lending continues to recover, remortgaging is still on the decline.

According to the data, the number of house purchase loans in August is down 5 per cent compared with July to 53,000. However, this is still 29 per cent higher than August a year ago.

House purchase activity, worth £7.2bn in August, accounted for its largest share of total mortgage activity since 2002, according to the CML.

At £12.3bn, gross mortgage lending - which encapsulates all mortgage lending activity including house purchase, remortgage, and buy-to-let lending - declined 36 per cent from August last year.

Paul Samter, economist for the CML, said: "Remortgaging demand has fallen away in the low interest rate environment and this is dragging down gross lending levels overall."

Paul Hunt, managing director of Phoebus Software, a supplier of software to mortgage lenders, said: "With volumes down from July, these figures just go to show we should not get carried away with some of the good news we have been hearing recently."

Hannah-Mercedes Skenfield, mortgages channel manager for Moneysupermarket.com, said the website had seen an increase in the number of people comparing remortgage deals in September.

She said: "The implication in this is that borrowers are being tempted off their standard variable rate if an exceptionally low rate becomes available, but not that they are returning to the market in fear of the base rate increasing just yet."