The number of active remortgage deals in the market has shot up by more than 40% year-on-year, new data from conveyancer LMS has revealed.
The firm’s data confirmed the number of remortgages rocketed from 28,400 in December 2016 to 39,943 in December 2017, a jump of 41%.
The firm pointed to last year’s increase in bank base rate from 0.25% to 0.5%, and the likelihood of at least one more rise this year, as a strong catalyst behind the rising demand to remortgage.
The markets are now pricing-in the next base rate rise to occur in Mar, with a further three increases over the next three years. LMS research suggests that around 82% of borrowers now expect an imminent rise.
Nick Chadbourne, chief executive at LMS, said: “We are still in a ’settling-in‘ period – borrowers and lenders have yet to fully acclimatise to the current situation. But rising interest rates on trackers and standard variable rate mortgages are driving remortgage activity with borrowers highly motivated to remortgage.
“The talk of further base rate increases will no doubt continue to stimulate the market over the coming weeks.
The firm’s research revealed that the base rate rise has also dented borrower demand for variable rate products. Just 2% of remortgage customers opted for a variable deal in December 2017, down from 9% the previous December and a new low.
Alongside this, demand for five-year fixed products has risen from 23% market share last year to 46% in December 2017.
Chadbourne pointed out that with rates rising, borrowers are looking for greater security.
He continued: “While variable rate products are versatile and provide a level of flexibility that might have appealed to borrowers when the base rate was falling, in the current climate of rising rates, the security offered by fixed-rate products is the natural choice for many now.
“Borrowers have been primed to expect a higher cost of borrowing and they are opting to secure their position and eliminate risk where possible.”
