One in ten remortgagors save over £500 a month in August

11% of remortgagors made monthly savings of over £500 in August due to falling rates following the Bank Rate cut, according to data from LMS.

Related topics:  Mortgages
Rozi Jones
23rd September 2016
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"The prospect of freeing up more than £500 a month is surely enough to make anyone re-evaluate their current deal"

The figure represents an increase of two percentage points from July and four percentage points compared with June to the highest level seen this year.

The result of remortgaging for this group of homeowners is a minimum saving of more than £6,000 in their annual household budgets: the equivalent of almost a quarter (23%) of the average UK national salary of £26,260.

Compared with a year ago, those whose existing deals expired last month and who remortgaged as a result will have found rates significantly lower: an average three year fixed mortgage at 75% LTV was 52 basis points cheaper than it was in August 2015, while the average two year fix at 90% LTV was 62 basis points cheaper.

In contrast, the average standard variable rate has fallen less dramatically year on year from 4.48% in August 2015 to 4.33% in August 2016.

Just over a quarter (26%) remortgaged in August to increase the size of their loan, a two percentage point drop from 28% in July and a four percentage point drop year on year from August 2015. This may be a sign of caution from homeowners about taking on extra debt at a time when the country’s long-term economic outlook following the vote to leave the European Union is still unclear.

Andy Knee, Chief Executive of LMS, commented: “Evidence points to a strong outlook for remortgaging, which is currently outperforming other areas of the mortgage market due to a climate of low rates and a price war between lenders. The prospect of freeing up more than £500 a month is surely enough to make anyone re-evaluate their current deal: an additional £6,000 a year can go a long way to ensuring the future stability of households across the country by providing extra funds to save, invest or simply get by from month to month.

“The Bank of England’s decision to lower the base interest rate has profoundly impacted the expectations of homeowners when it comes to future rate changes. More people than ever believe rates will fall further, which would be good news for first time buyers and remortgagers alike, even as they benefit from what is already record-low pricing.

“Looking ahead, the recent drop in the percentage of remortgagers increasing the size of their loans may serve as an omen of caution while the nation’s long-term economic outlook remains unclear. Homeowners may think twice about borrowing more when they remortgage; but in the meantime, there are plenty of other incentives to do so and the market remains resolutely open for business.”

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