According to data from conveyancing firm LMS, borrowers began taking advantage of the lowest and longest-term deals available as the remortgaging boom and price war began to hit.
The total of 41,497 August remortgagors was up from 36,800 in July and 34,900 in August last year as 45% said they expected interest rates to rise soon.
However, it appears the trend for drawing down equity in their property, which Mortgage Solutions highlighted in its exclusive research last month, has begun to decline.
The average amount of equity released by remortgaging fell by 12% to £23,634 in August from £26,457 in July.
And despite the increase in the overall number of remortgagors, the total value of remortgaging on a month-on-month basis fell by 5% to £6.38bn in August, from £6.7bn in July. This was in contrast to August 2016 which saw £5.9bn of remortgaging (8% lower) conducted.
Locking-in long-term
Perhaps surprisingly, just 16% of borrowers lowered their overall mortgage payments by remortgaging. Instead, they chose – to lock into deals with record low rates and manage the impact of potential rate rises.
This followed consistent falls in remortgage interest rates over the last year and was emphasised with five-year fixed deals being selected in record numbers – 39%, up from 37% in July.
Remortgaging frequency remains at four years and nine months – the same as the previous four months.
This reflected the popularity of fixed five-year deals as two fifths of remortgagors said they would next remortgage within five to six years – up on the 34% who said the same in July.
Rates rising
New LMS chief executive Nick Chadbourne (pictured) noted that while the total value of remortgaging has fallen, there was a surge in the number of transactions.
“The number of people remortgaging hasn’t been this high since January. Remortgagors are locking into record low rates to manage the impact of potential rate rises and bolster their financial security,” he said.
“This makes sense given borrowers were warned that time could be running out to fix into low cost deals in August. According to the National Institute of Economic and Social Research, the UK economy will bounce back in 2018 – prompting the Bank of England to raise interest rates to a more normal level before Brexit.
“It’s no surprise 45% of borrowers we spoke to think interest rates are going to rise soon,” he added.
Chadbourne also reiterated his call for the conveyancing industry to introduce new technology to better manage the surge in demand.
“Given demand for remortgaging services is likely to continue to increase, we must continue to evaluate the process to drive efficiencies to deliver increased volumes. Consequently, I am committed to ensuring LMS develops both technology and service capability to support this requirement,” he said.
