The slowdown in November and December has reversed gains made in the preceding two months of the year (September up 9.5%, October up 23.1%). These figures appear to contradict information released by Broker Conveyancing yesterday, which showed an increase in remortgage business over the last quarter of 2012.

Despite this, the latest figures released from the CML show total gross mortgage lending also fell, by 9.3% in December to £11.7bn. Owing to this fall, gross remortgage lending as a percentage of total gross lending fell only slightly to 23% in the final month of the year. However, this now represents the lowest proportion since December 1999 (22%).

The £2.7bn of gross remortgage lending in December is 13% lower than in November and 24.7% lower than the same time in 2011. December’s figure was not only the lowest recorded in 2012 but again, is the lowest monthly value since the end of 1999. This stagnation is reflected across the mortgage market and can, in part, be attributed to a seasonal lull in homeowner activity.

LMS estimates that the total number of remortgage loans advanced fell by 14.2% to 19,279 in December, down from 22,470 in November.

However, the average remortgage loan amount increased for the fifth consecutive month in December, rising by £1,980 to £140,553. December’s figure is 6.1% higher than the same time in 2011 (£132,528) and the highest it has been since January 2009 (£143,126). While total lending is down those remortgaging are borrowing more.

Commenting on the latest figures, Andy Knee, Chief Executive of LMS says:

The remortgage market contracted in 2012, owing to exceptionally low levels of activity in the second half of the year. As we predicted, there were a total of 310,000 transactions last year, down from 374,000 in 2011 with the total value of these loans falling to its lowest level since 2005 at £2.7bn.

The drop in activity in the second half of 2012 was widely anticipated, this being a lull before the full introduction of the Funding for Lending Scheme which is widely expected to bring a pick up to the mortgage market in 2013. December’s drop can also be attributed to savvy homeowners holding off for more competitive products in the New Year combined with the normal seasonal lull in activity in the months leading up to Christmas.

We expect FLS to increase competition between lenders and this should result in better deals for the mortgage customers and a restoration of growth in the market in 2013.

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