According to the LMS remortgage snapshot for May, some 29 per cent of people went for a two-year fix and just one per cent chose a 10-year fix. A tenth of people selected a tracker deal.
The reason why people went for five-year fixes could be explained by their expectations for interest rates in the future. Some 79 per cent of respondents predicted that rates would rise in the next year, while six per cent said this would happen more than a year in the future.
The report showed that borrowers’ monthly payments rose by £317.20 on average after refinancing.
Some 65 per cent of people saw their monthly mortgage payments go up, while a quarter reduced their bill.
Reducing monthly payments was the main purpose of remortgaging in May, as 29 per cent of people said this, making it the most popular response. Of those who did lower their payments, their monthly bill fell by £284.32.
The second most popular reason for remortgaging was to release equity, as stated by 22 per cent of respondents.
Some 18 per cent said it was to lock in a good deal and give themselves long-term security.
Remortgage instructions rose by 11 per cent in May and there were one per cent fewer refinances completed. Pipeline cases also fell by two per cent compared to April.
Pipeline to swell in second half of the year
Nick Chadbourne, CEO at LMS, said the remortgage pipeline would “swell” in H2 as it was predicted that over half a million people would be refinancing.
He added: “As predicted, instructions increased again in May following a seasonal dip the month before. Until now, we have seen a lot of people stay on variable rates in the hope that, if they stick it out, rates will fall. However, the base rate increased to 4.5 per cent early on so it’s not a huge surprise that people looking to remortgage when their product expires are aiming to come off standard variable rates for more stability.
“As we head into the second half of the year, we expect a big jump in instructions and the pipeline to swell. It will be the busiest in terms of product expiries since the 2008 credit crunch with well over half a million people expected to remortgage.
“Anyone doing so may well choose a two-year fix in the expectation of a lower rate next time. If the market predictions are correct, this would be wise as rates will likely come down during 2024.”
