Some 22% of remortgagors choose a five-year fixed rate last month, compared to 8% of customers which had one before remortgaging, as customers sought stability in the post-referendum climate amid falling rates. Likewise, customer preference for two-year fixed rates dwindled as the proportion of consumers on this product type dropped from 38% to 26% after they remortgaged.
According to LMS’s findings of 825 remortgagors, 85% managed to lower their mortgage rates in September, backing findings that the majority of remortgages in September were driven by rate, as customers changed the type of their mortgage product to suit their current financial situation and expectations.
Almost a quarter of consumers formed their remortgaging decision on a lender based on a recommendation from their broker or adviser, while 8% opted for lender reputation and 5% said customer service was the most important factor.
Andy Knee, chief executive of LMS, said: “While two-year fixed products remain the most attractive to remortgagors, the growth in popularity of five-year term fixed mortgages is interesting and suggests two distinct personalities among homeowners at present; those keen to take advantage of competitive rates and lower costs with short-term fixes and; those who are more cautious, prioritising greater stability in a period of uncertainty by fixing for longer.
“As the terms of Brexit remain unclear and its impact on prices and costs are not fully realised, it will be interesting to see whether more people start erring on the side of caution or wait for more information.”
Awareness of the benefits of remortgaging appeared to be evident among homeowners as 64% said they plan to do so again within the next four years, while just 12% expect to wait more than eight years to remortgage again.
Despite this, 62% of consumers in September only remortgaged when they did because they had come to the end of their current deal. LMS warned this trend suggested complacency or lack of awareness, with consumers missing out on potential monthly savings earlier than they realised.
Knee added: “Today’s favourable conditions and very little anticipation of rates rising any time soon, means homeowners plan to take advantage of this and remortgage more frequently. For those who have not remortgaged yet, there is still plenty of incentive to act before the year is out, and may provide some welcome relief in the run up to Christmas when rising prices and higher inflation are likely to take its toll on family finances.”