Total remortgage lending increased by just 1% from £5.20 billion in February, to £5.26 billion in March. In addition, remortgaging accounted for just a quarter (25%) of the total lending market, down from 29% in February.
Andy Knee, chief executive of LMS said:
“Theresa’s May decision to trigger Article 50 stopped a surging remortgage market dead in its tracks. Remortgage lending plateaued at £5.2 billion, and market share dropped to 25%, as homeowners predicted Article 50 would impact on the remortgage market. A general election and Brexit negotiations could spell disaster and coupled with rising interest rates, the remortgage market looks set to experience some tricky months between now and the end of the year.”
Price and long-term financial security were the two core motives for remortgaging in March. One in five (19%) homeowners lowered repayments by remortgaging in March, while four in five (84%) lowered their mortgage rates through remortgaging.
March witnessed a surge in the number of homeowners fixing for longer. Nearly a third (32%) fixed onto five-year mortgages – a massive increase from the 9% who previously had a fixed five-year deal. Concurrently, variable mortgages decreased in popularity, with under one in ten (7%) fixing onto a variable mortgage – down from the 19% who previously had one.
However, for the first time since September 2016, the average mortgage rate increased. The average mortgage rate climbed to 2.13% in February from 2.06% in January – the highest increase since June 2012. Significantly, the number of homeowners expecting a rate fall has dropped for the sixth month in a row. In September 2016, 9% of those polled by LMS expected rates to fall. By January, this had fallen to only 2% and now sits at just 1%. Remortgagors predict further interest rate rises, with just under half (46%) expecting mortgage rates to rise again within a year.
Andy Knee, chief executive of LMS, added:
“On the bright side, the number of people remortgaging rose year-on-year in March – the result of improved affordability. Remortgage repayments accounted for just 17.3% of income in February, down from 18.4% in February 2016. Homeowners sought out cheap prices and long-term security when remortgaging. For those who managed to remortgage in March, this will be of paramount importance in the months to come.”
