Figures from Stonebridge showed that overall mortgage activity rose 24.6% in the first quarter, driven by remortgaging activity as applications for new homes purchased declined in a softening market.
Remortgaging to remain strong
The surge reflects the number of people who took out pandemic-era mortgages five years ago as movers ‘raced for space’ to work from home and spend lockdown with their families. Many of these mortgages were on ultra-low rates, such as 1.85%, but as these fixed deals come to an end, homeowners are finding that they are paying far more for their mortgages.
Recent figures also show a surge in buy-to-let (BTL) remortgage activity as buyers seek the best rates.
Rob Clifford (pictured), chief executive of Stonebridge, said two-year rates were now more popular, as the mortgage rates that homebuyers are getting are less attractive and they do not want to lock in for so long.
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“We know many borrowers locked into attractive five-year rates during the pandemic. Now that so many of those consumers are reaching the end of the deals they grabbed at that time, we are naturally seeing huge demand for advice on refinancing options.
“That will continue throughout this year, with plenty of lenders dynamically pricing both product transfers and remortgage deals to win market share,” he added.
Trackers may rise in popularity in H2
The share of all mortgages on two-year fixed rates rose by a quarter from 51.6% of all home loans to 65.2%. The share of five-year mortgages fell from 39.4% to 29%.
Clifford added that if the bank base rate (BBR) looks likely to fall in the near future – particularly if the energy crisis being created by the Iran War is short-lived – people may become less keen on fixing their mortgage rates for even two years, and variable and tracker rates may have their day in the sun.
“We’re likely to see a reversal in rate volatility in the second half of the year and the popularity of variable or tracker rates might increase. A variable product would allow borrowers to capitalise on a falling base rate once the conflict subsides, but this is a time when impartial and expert mortgage advice is worth its weight in gold,” he said.
