Sceptic remortgagors continue to capitalise on low rates
A new report from LMS has revealed that the proportion of remortgagors who believe that interest rates will rise has decreased by three percentage points from 25% in December 2015 to 22% in January 2016.
Global economic uncertainty and the possibility of a Brexit in 2016 has delayed the likelihood of a base rate rise. The percentage of people now expecting a rate rise is therefore eight percentage points lower than in January 2015 last year, when nearly a third of people (30%) of people expected a rate rise.
However, this has not dissuaded homeowners from remortgaging or caused borrowers to become complacent. Almost two-thirds of people (65%) remortgaged to take advantage of lower interest rates.
Monthly gross remortgage lending rose to a seven-year high of £6.2bn in January 2016, a rise of 49% from £4.2bn in December 2015.
Savvy borrowers were also able to reduce their monthly outgoings. More than a third (36%) who remortgaged were able to reduce their payments by up to £500. A further 3% were able to reduce their monthly payments by more than £500.
Almost a third (29%) of remortgagors were able to increase the size of their loan, of which 72% increased the size by more than £10,000.
Other reasons to remortgage included paying off other debts, a factor that has fallen by four percentage points to 7% from 11% in December 2015 as financial pressures ease following Christmas. A small number of remortgagors also chose to release cash to help a child buy property (1%) while one in five opted to spend on home improvements (20%).
More than eight in ten (83%) people deciding to remortgage chose to switch lenders. There was a five percentage point rise from 41% in December to 46% in January 2016 in the number of people opting to use brokers or mortgage advisers in the remortgage process, as more borrowers saw the value of financial advice to help navigate them through the range of options.
Andy Knee, Chief Executive of LMS, comments: “With the looming possibility of a Brexit, and in the midst of global uncertainty and shaky markets, we’re seeing indications from the Bank of England of a base rate rise being pushed back further. Some have predicted a rise to be delayed until as far as 2019.
However, borrowers appear to be wiser, and are still remortgaging to reduce costs rather than becoming complacent. Remortgage lending rose by 49% to £6.2bn in January from £4.2bn in December and was also recorded as 45% higher than the same time last year. With the cost of a fixed-rate mortgage at historic lows, plummeting swap rates and so many great deals on the market, it’s never been a better time to lock into low interest rates.
It’s also encouraging to see borrowers taking greater control of their finances and seeking advice, especially at a time when many property investors in particular are hoping to complete their transactions before April tax changes come into effect.”