Just one in five remortgagors fear rate rise

Just one in five remortgagors (22%) polled in July believe interest rates are going up - despite Mark Carney suggesting that a rise would occur by early 2016 - according to findings from LMS.

Related topics:  Mortgages
Rozi Jones
28th August 2015
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However, the number of people predicting rates will decrease fell by one percentage point from last month to 4% and remortgaging activity was boosted by borrowers keen to take advantage of the competitive offers currently on offer.  

The number of remortgaging loans in July rose by 47% from 31,600 in June to 46,423 in July. Remortgage lending also reached £7.2bn, up 89% year-on-year and 41% from June. The average interest rate fell to 2.56%, continuing a nine-month long trend of falling rates.

Despite the apparent lack of concern about an interest rate rise, almost two in three (62%) people remortgaging in July did so in order to lower their mortgage rates. This, however, is down by 4% compared to June 2015. Taking advantage of the record-low rates meant more than a third (37%) of borrowers managed to reduce their monthly mortgage payments by £500.

Almost one in three (32%) borrowers who remortgaged did so to increase the size of their loan, with one in four (25%) of those extending their loans by more than £10,000.

Of the 32% increasing the size of their loan, almost two thirds (62%) used the additional cash to pay for home improvements, while 27% paid off other debts.

Almost half (45%) of those who remortgaged did so simply because they had come to an end of a deal, down by 4% from 49% in June.

Four-fifths took advantage of the current competition in the market and switched lenders. This has remained constant since June, but is up by 5% since May. Just 3% of those who stayed with their lender were incentivised to do so.

Andy Knee, Chief Executive of LMS, commented:

“It is surprising that so few remortgagors were expectant of an interest rate rise, given the volume of speculation since Mark Carney’s announcement last month. The Black Monday crash and volatile markets have now most likely postponed an interest rate rise by a few months, so those looking to capitalise on record-low interest rates can breathe a sigh of relief.

“However, we shouldn’t forget that the Base Rate cannot be kept on hold forever and the Bank of England is pushing towards a tighter monetary policy. There is no reason why homeowners should stall; now is the opportune moment to make the most of competitive rates and we anticipate a continued flurry of activity among homeowners keen to take advantage of this and reduce their monthly outgoings.”

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