Fixed five-year remortgage deals have now overtaken two-year fixed deals in popularity in response to Article 50 being triggered and rising inflation.
According to conveyancer LMS, the percentage of remortgagers taking out a five-year fix was 29% in January compared to 23% of remortgagers who opted for a two-year fix.
There has been a surge in remortgage activity in recent months, driven by record low rates.
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.
Andy Knee, chief executive of LMS, said five-year deals were increasing in popularity as homeowners are looking for added security ahead of Article 50 being triggered.
He said: “When remortgaging in January, homeowners weren’t solely looking for good value but also seeking long-term security, hence the increasing popularity of fixed five-year deals.
“With inflation on the rise – rising to 1.8% in January, the highest since June 2014 – and both the Budget and Article 50 not far off, remortgagors took advantage of January’s favourable conditions and record-low rates to guard against potential upsets in the near future.
“Almost half (45%) of remortgagors in January now expect interest rates to increase in the next year so homeowners would be smart to remortgage now – before it’s too late.”
The average homeowner is now remortgaging every four years, four months sooner than in January last year.
The frequency of remortgaging has improved substantially since January 2011, when the average term was six years and five months.
Activity accelerated at the turn of the year, with overall remortgaging activity rising 10% between December and January, up from 27,700 to 30,439.
The value of remortgage transactions also rose month-on-month by 7%, but suffered an annual fall of 15% from £5.8 billion in January 2016 to £4.9 billion in January 2017.
Price remains the most important issue for homeowners when remortgaging. Over half (54%) of consumers selected their lender based on them having the cheapest mortgages or lowest interest rates.
Four in five (87%) remortgaged to take advantage of low rates, while nearly a quarter (22%) remortgaged to release equity in order to make home improvements.
The number of remortgagors consulting a broker increased sharply at the turn of the year. Nearly seven out of 10 (69%) opted to remortgage via a broker – more than the 58% of remortgagors who did so in December.
Knee said: “The opportunity to secure lower mortgage rates, reduced monthly repayments and free up extra capital for a holiday or home improvements is continuing to drive both frequency and activity. What’s more, a greater number of homeowners sought out professional advice to help them take advantage of these benefits.”
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