Interest rate cut sees remortgaging spike

Interest rate cut sees remortgaging spike

Record low interest rates have sparked the highest number of remortgage transactions since July 2009, according to figures from mortgage processor Legal Marketing Services.

The number of remortgages in August rose to 36,195, up 8 per cent from July and 45 per cent annually, as homeowners took advantage of the base rate cut early that month to refinance their borrowing.

At a record low, the Bank of England base interest rate is now 0.25 per cent after it was cut from 0.5 per cent.

Article continues after advert

The average loan amount fell by 6 per cent to £162,263 in August as remortgagers also reduced their average loan to value from 58 per cent to 54 per cent amid an uncertain economic backdrop post the UK’s vote to leave the European Union.

Year-on-year, gross remortgage lending rose by 40 per cent from August 2015 levels.

Homeowners are remortgaging more frequently that a year ago, LMS also found, with the average term of their previous mortgage having fallen by 8 months.

Commenting on the figures, Andy Knee, chief executive of LMS, said while record low interest rates continue to have a positive impact on the mortgage market, there are signs homeowners are holding back against an uncertain outlook.

“Homeowners appear to be in a more cautious mood that last month: borrowing less in the wake of a couple of turbulent months, both politically and economically, and lowering their LTV in the process. 

“A year ago, homeowners who remortgaged had waiting over five years to do so since they took out their previous loan. In many cases, that length of time will have made a world of difference to the interest rates that are available on the market and the value of their homes.

“With today’s favourable conditions it is no surprise to see eight months shaved off the average time that people wait to remortgage and there is plenty of incentive for more people to consider acting before the year is out.”