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Two-fifths of remortgagors fix for five years amid base rate rise – LMS

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  • 05/01/2022
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Two-fifths of remortgagors fix for five years amid base rate rise – LMS
Some 59 per cent of borrowers who remortgaged in November opted for a five-year fixed rate product ahead of the Bank of England’s decision to increase the base rate from its record low of 0.1 per cent to 0.25 per cent.

 

Reducing costs was the primary reason for those who remortgaged with 29 per cent citing this, the LMS Monthly Remortgage Snapshot showed.  

During the month, 46 per cent of borrowers reduced their monthly payments by remortgaging with an average saving of £198.19 per month. 

A third of people fixed for two years, while just two per cent chose 10-year fixes and a further two per cent opted for tracker products. 

Some 72 per cent of remortgagors said they chose a fixed rate to have security over their monthly payments while 14 per cent were worried about the economy and wanted to lock in a good deal. 

This uncertainty towards future costs was reflected in the 81 per cent of borrowers who said they believed rates would go up in the next year. 

The prospect of a rate change was also indicated by an 11 per cent rise in remortgage instructions in November, ahead of the eventual base rate increase the following month. Pipeline cases also went up by 12 per cent during the month. 

Nick Chadbourne, chief executive officer of LMS, said remortgage activity was “largely fuelled” by an expected Bank of England base rate increase, which was already influencing banks and building societies to reprice their mortgages. 

He added: “For borrowers coming to the end of their fixed term, this rise in rates prompted many shop around to secure the best deal possible, rather than opting for a product transfer, as shown by the rise of 11 per cent in instructions month-on-month. 

“The high activity levels we witnessed in November are set to continue for the foreseeable future, spurred on by the high volume of early repayment charge (ERC) expiries in December. This should keep the remortgage market buoyant as we head into the new year with a flood of new instructions.” 

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