Cantillon: Return of the remortgage – we approve

Remember the remortgage?

As the economy noisily boomed all those years ago, so did the notion of switching your home loan to take advantage of lower rates and maybe, if you were very lucky, snagging a tracker.

And you may also recall your old pal, the top-up loan, the vehicle through which you could “release” the equity in your home, as if the value it had managed to build up all on its own was clamouring for escape.

Ah, those were the days.

In fairness to mortgage providers and their customers, remortgaging and topping up are both very normal features in mortgage markets that are functioning as they should. It’s thus no surprise that they fell off the stage as the economy and house prices faltered, and equally no shock that they now appear to be tentatively re-emerging to tempt us once more.

The latest data on mortgage approvals (not drawdowns) from the Banking and Payments Federation Ireland (BPFI) helpfully sheds some light on the whole business, showing that the number of "remortgage/top-up" loans approved this summer reached the highest volume and value since the data began to be gathered in this way 2011. This translates into growth of 105.3 per cent in the value of remortgage/top-up loans in the three months ending in August this year (on a three-month moving average) when compared to the same period of 2014. In cash terms, this was a jump from €19 million being approved under this heading, to €39 million.

The comparable increase in the actual number of loans approved was a 53.5 per cent jump from 202 to 310.

These are not huge numbers, nor would one expect them to be. For context, a separate (and not identical) BPFI/PwC data series shows that there was one month in 2006 where more than 18,000 top-ups were drawn down alone, while remortgages topped 7,500 at one point in 2008. Given not all approvals translate into drawdowns, it’s safe to presume that approval levels in the same pre-bust months were even higher.

The BPFI has not broken down this year's August approval data to show how the "remortgage/top-up" heading splits between the two categories, but it is thought switching is the half of the picture that is by far showing most momentum.

This is to be welcomed, since having consumers who feel they are in a position to seek a better deal is a feature not only of a healthy home loan market, but of an improved economy.

The same is true to a lesser extent of top-ups, but both are needed, and much, much greater evidence of both will be required before the Irish mortgage market can be seen to flourish to the extent its customers deserve.