The LMS Monthly Remortgage Snapshot showed there was a 5% uplift in the number of remortgages completed in May, and the pipeline grew by 3%.
There were 12% more instructions to remortgage, and the cancellation rate rose by 2%.
Some 46% of borrowers increased their loan size when refinancing, and 29% had the main intention of lowering monthly payments.
The average loan increase after remortgaging was £21,474.
Nearly a quarter – 23% – of remortgagors reduced their total loan size by £12,902 on average, and 32% saw no change.
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Around 59% of people who remortgaged in May increased their monthly payments by £294.29 on average, while the 29% who reduced their payments saw them decrease by £218.79.
Just over a tenth – 12% – saw no change in their monthly remortgage payments.
The next-most popular mortgage term for people who refinanced in May was the two-year fix, which was chosen by 42% of borrowers.
Borrowers expect rates to rise
The popularity of the five-year fix in May was potentially influenced by the 46% of borrowers who believed interest rates would rise within the next year.
Further, 19% remortgaged to have certainty over their monthly payments or to lock in a good deal now, while 26% wanted to release equity or borrow more.
Some 31% did not expect rates to go up, while 23% said any increases were more than a year away.
Just 3% opted for a three-year fix and 2% chose a 10-year fix. Some 2% selected a tracker mortgage and 3% chose a different kind of mortgage.
Almost three-quarters – 72% – of borrowers chose a fixed rate so they had the security of knowing how much they would be paying each month, while 15% were worried about the economy. A tenth said a fixed rate deal was recommended by their adviser.
Seeking stability and predictability
Nick Chadbourne, CEO of LMS, said: “Instructions and pipelines continue to build steadily, aligning with expectations as we head into the second half of the year. With around 1.6 million fixed term mortgages due to mature over the next 12-18 months, remortgage activity is expected to remain strong.
“We’re seeing borrowers take a proactive approach, with many choosing to fix for five years – a trend driven by a desire for long-term payment certainty amid ongoing rate volatility and wider economic uncertainty. Broker conversations suggest that stability and predictability are taking precedence over short-term flexibility, which is keeping five-year deals firmly in favour.”
He added: “Positive sentiment is also being echoed by conveyancers, many of whom report that recent investments in technology and automation tools are helping them flex their capacity to meet demand.
“These efficiencies are playing a crucial role during peak periods, smoothing transaction volumes and supporting service consistency.”
