There has been a surge in the number of borrowers remortgaging into five-year deals, the latest mortgage lending statistics have revealed.
Popularity of longer-term deals had waned at the start of the year with borrowers opting to fix their mortgage for two years, according to the LMS remortgage report.
But greater competition from lenders keen to lure in borrowers for longer terms and rate rises on five-year deals increasing far less than those of the two-year options has caused a shift.
In April demand for five-year fixed-rate remortgages went up 47%, representing half the market according to the report. In March they made up just 36% of this market.
It also emerged the number of borrowers using an independent mortgage adviser or broker to remortgage has also hit a record high in April increasing from 72% in March to 78%.
Nick Chadbourne, chief executive of LMS, said: “The popularity of five-year fixed-rate deals rebounded in April having dipped in the first three months of the year.
“Lenders are eager to attract longer-term business which has created a competitive landscape for customers. This has ensured five-year average rates have remained relatively flat month-on-month.
“As more borrowers seek independent advice when remortgaging, the market is reacting quickly to the shifts in headline rates.”
Shelter from rate rises
According to Chadbourne five-year fixed deals tend to be more popular amongst borrowers who are seeking stability. He said many people will be opting for these deals to provide some certainty amid the potential economic and political upheavals in the next few years.
Currently 77% of people remortgaging expect a rise in the Bank of England (BoE) base rate this year. This compares to 46% in April 2017.
Chadbourne added: “After hints of a rate increase earlier in the year, sluggish economic growth discouraged the BoE from raising the base rate. Yet more than three quarters of borrowers still believe another base rate increase will happen at some point in the next twelve months.
“The surge in borrowers playing it safe by locking in the longer term fixed-rates when remortgaging is understandable when the direction of the economy is so difficult to predict.”
