According to the LMS Monthly Remortgage Snapshot, in the month of November 2021, almost two-thirds of homeowners who made the decision to remortgage did so on a five-year fixed rate. This is a direct result of the Bank of England’s decision to increase the base rate from an all-time low of 0.1% to 0.25%.
The main reason for remortgaging was to reduce costs, with 29% of property owners citing this as their primary motivation. By using a remortgage product, almost half of borrowers were able to reduce their monthly costs by an average of £198.19.
Around 33% of clients opted for a two-year fixed mortgage, while just 2% went for a ten-year fixed product, and another 2% chose tracker products.
Seventy-two per cent of buyers stated that they had chosen fixed-rate products in order to have more control over their monthly repayments. The state of the economy and an unsure future prompted 14% to find a fixed remortgage deal where they could be locked into a good deal, thereby giving some confidence in the future.
With the uncertainty of how the future will be affected by the ongoing COVID-19 issues and the government’s attempt to stabilise inflation, over eighty per cent of buyers expect that interest rates will continue to rise over the next year.
The predicted increased interest rate was fuelled by an eleven per cent rise in remortgage instructions during the month of November, ahead of the Bank of England’s increase in December.
The chief executive officer of LMS stated that remortgage activity was “largely fuelled” by an expected Bank of England base rate increase, which was already influencing banks and building societies to re-evaluate the prices of their mortgage products.
He added: “For borrowers coming to the end of their fixed term, this rise in rates prompted many to shop around to secure the best deal possible, rather than opting for a product transfer, as shown by the rise of 11 per cent in instructions month-on-month.”
“The high activity levels we witnessed in November are set to continue for the foreseeable future, spurred on by the high volume of early repayment charge (ERC) expires in December. This should keep the remortgage market buoyant as we head into the new year with a flood of new instructions.”