There's ongoing uncertainty around base rate at the moment, but whether it rises sooner or later, one thing's for certain – mortgage rates aren't going to stay this low forever, which is probably why so many people are looking to longer-term remortgage deals to secure their finances for the future.
Research from LMS has revealed a clear shift towards longer-term remortgage deals, with 37% of remortgagors fixing onto a five-year deal in July, the highest on record, and a significant rise from the 7% who previously had a five-year product. This highlights the fact that homeowners are keen to guarantee repayment certainty and financial security, as if they can fix their mortgage payments for half a decade, they needn't worry about rising mortgage rates for the foreseeable future.
Perhaps as a result of that – and the higher rates on long-term mortgage deals – few remortgage with the specific intention of lowering their monthly repayments, with just 15% doing so in July, down from 21% in June. Similarly, only 15% remortgaged to increase the size of their loan (down from 19%), showing that it's all about long-term financial security rather than short-term gain, as concerns around rising interest rates bed in.
Indeed, just 2% of remortgagors predict that interest rates will fall in the next year, with 98% expecting rates to stay the same or rise, so they're not looking to take any chances. "We are seeing a significant change in consumer behaviour when remortgaging," said Andy Knee of LMS. "Typically, over the last year, people were remortgaging to save on their monthly repayments or borrow additional funds.
"Instead, with rates low and expectations of a rate rise high, people are fixing for longer for added financial security. Borrowers are taking shelter from future rate rises and preparing for potentially turbulent times to come, [with] a significant decline in interest-only and variable rate deals. It's a flight to financial security."
Rush to remortgage
Given growing rate concerns, not to mention improved affordability – LMS found that the average annual mortgage repayment fell from £8,197 in May to £8,080 in June, accounting for just 17.1% of annual income, the lowest proportion this year – it's little wonder that so many people are taking the plunge and remortgaging.
Indeed, the number of people remortgaging their home in July rose by 12% on a monthly basis, up from 34,300 in June to 38,348. Andy said that improving affordability "propelled overall activity," and "with interest rates still low and lenders competing with one another to offer customers the best possible deal, there has never been a better time to remortgage in 2017."
This trend has been backed up by additional data from Yorkshire Building Society, with the mutual seeing a surge in remortgage applications over the summer as we approach the biggest mortgage maturity period in five years.
The mutual recorded a 68% year-on-year increase in remortgage applications in August 2017, following annual increases of 57% in June and 58% in July, as £35 billion worth of mortgages in the UK are due to mature this month and next.
"With so many mortgage deals coming to an end during September and October, it's not surprising that we saw, and continue to see, heightened remortgage activity over the summer months," said Charles Mungroo, Mortgage manager at Yorkshire Building Society.
"It's encouraging that borrowers have been taking action before their deal comes to an end, and we're hopeful this trend continues."
If your fixed mortgage deal is almost at an end – and especially if you're already on your lender's standard variable rate (SVR) – now's the time to look into your remortgaging options.
Mortgage rates remain among record low levels, so now's the perfect time to switch, and if you opt for a five-year mortgage, you can avoid the impact of a base rate rise for years to come.
Sam: 11th Sep 2017 14:57:00
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