The fear of rising rates is driving borrowers to remortgage, new research shows.
According to conveyancer LMS, the number of remortgagors fearing a rate rise has increased dramatically over the last 12 months.
In December 2015, 6,500 remortgagors said they anticipated an interest rate rise within the next year compared to 10,800 in December 2016 – an increase of 66%.
There were 27,700 remortgages carried out in December 2016 and 39% of remortgagors surveyed said they anticipated a rate rise within the next year.
Remortgaging involves switching your current mortgage deal either with your existing lender or to a new one.
By choosing to remortgage you can reduce monthly repayments, move from a variable rate deal to a fixed rate or even release equity in your property.
In August, the Bank of England cut the base rate for the first time in seven years to 0.25%, prompting mortgage lenders to slash rates.
With the number of competitive deals on the market growing, many borrowers are choosing to remortgage to take advantage of the low rates currently on offer.
However, experts are warning that the record low rates we are currently seeing will not last.
Adding to fears over a surge in rates, LMS said the increased remortgage activity – also reported by the CML – has been driven by an increase in the number of people looking to lower their monthly outgoings too.
In December 2016, 23.3% of remortgagors told LMS they were looking to reduce their monthly outgoings by remortgaging. In December 2015, just 21.7% of remortgagors said the same – a 14% rise over the course of the year.
Price was by far the most important factor when choosing a lender. More than half (51%) of remortgagors said they chose their lender based on low cost deals, more than twice as many as the second most important factor – customer service (25%).
Keen to capitalise on potential savings, 56% expect to remortgage again within the next four years, whereas one in six (17%) plan to wait more than eight years.
LMS saw a lull in remortgaging activity from November to December, although the majority of the change was the result of a seasonal slowdown.
Andy Knee, chief executive of LMS, said: “2016 was a great year for remortgaging. There were drivers on both the supply and demand side. Record low rates and anticipation of a rate rise in 2017 contributed heavily to the huge surge in activity. With inflation set to outstrip wage growth over the coming year, the opportunity to lower mortgage rates and reduce monthly outgoings will provide welcome relief for many families dreading the squeeze on household budgets – evidenced by price being the primary motivation when choosing a lender.
“It’s rewarding to see consumer awareness of the potential savings on offer is now so high. Savvy homeowners are already looking to remortgage again in the not-too-distant future. We anticipate a steady stream of remortgage activity throughout the first quarter of 2017. The only clouds on this otherwise blissfully calm sunny horizon loom in the form of Article 50. When Theresa May triggers it, the market can expect some choppy waters and a little less plain sailing.”
