While many lenders cut mortgage rates last month, borrowing costs remain high and average two-year fixed rates currently stand at 6.29 per cent, according to Moneyfacts.
Deterred by the prospect of passing a new affordability test, some homeowners are shying away from a remortgage with many turning to product transfers instead, a trend expected to continue throughout the fourth quarter.
Consequently, there was a 13 per cent decline in new remortgage instructions, according to LMS’s latest monthly analysis of the remortgage market accompanied by a 12 per cent fall in remortgage completions. Cancellations, meanwhile, rose by 7.6 per cent.
Among those going ahead, 39 per cent took the opportunity to increase the size of their loan in October by an average of £19,793. A quarter of remortgaging borrowers reduced their mortgage by an average of £14,165 and 36 per cent maintained the same balance.
Some 41 per cent of homeowners opted for a two-year fixed rate, the most popular product in October. Borrowers choosing a five-year deal accounted for 37 per cent of remortgages while trackers and 10-year fixes accounted for 8 per cent and 2 per cent of deals respectively.
The average UK remortgage balance was £200,913 excluding London and the South East where this stood at £356,195.
‘A million products maturing by Christmas’
Chief executive Nick Chadbourne (pictured) said: “October has seen an ongoing fall in remortgage activity. Instructions fell, cancellations increased and while the pipeline only dropped slightly, because completions also decreased, there has been a fall in the number of cases successfully progressing to the end of the process.”
“This was entirely expected,” added Chadbourne. “While interest rates have stabilised for now, they remain high and unlikely to drop until late 2024. In the current cost of living crisis, borrowers are understandably avoiding the need to undergo affordability tests by opting for product transfers instead.
“There are almost a million products maturing this side of Christmas. We expect the vast majority of these to opt for product transfers while those who need to remortgage will go continue to favour two-year fixes as they have done this month in the hope that rates fall by 2025.”