RemortgageSep 5 2017

Record numbers of remortgagers choose five-year fixes

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Record numbers of remortgagers choose five-year fixes

A record number of people remortgaged onto a five-year fix in July as homeowners looked for greater financial security.

More than a third of remortgagers (37 per cent) fixed onto a five-year deal during the month – up by one percentage point on June’s figure, according to conveyancing service provider LMS.

Meanwhile, transaction volumes jumped by 12 per cent, from 34,300 in June to 38,348 in July.

The transaction boost was driven by an increase in affordability, as the percentage of total income that the average annual mortgage repayment accounted for dropped to its lowest level this year, from 17.5 per cent in May to 17.1 per cent in June.

We are seeing a significant change in consumer behaviour when remortgaging.Andy Knee

Just 15 per cent of those who remortgaged In July did so to lower their monthly repayments – down from 21 per cent during the previous month.

The proportion of those remortgaging to increase the size of their overall loan also dropped from 19 per cent to 15 per cent.

Instead, homeowners appeared keen to lock into long-term deals to guard against an increase in interest rates, with 98 per cent of those surveyed expecting rates to either stay the same or increase over the next year.

LMS chief executive Andy Knee said: “We are seeing a significant change in consumer behaviour when remortgaging. Typically, over the last year, people were remortgaging to save on their monthly repayments or borrow additional funds. 

“Instead, with rates low and expectations of a rate rise high, people are fixing for longer for added financial security. Borrowers are taking shelter from future rate rises and preparing for potentially turbulent times to come. 

“The way people borrow is changing: there is a significant decline in interest-only and variable rate deals, and fixing for longer appears to be the top priority. It is a flight to financial security.”

Robert Lewis, operations director at North Wales-based Heritage Financial Solutions, said: “Five-year fixes probably represent a good 70 per cent of the remortgages that we are doing.

"People are looking for peace of mind, and the current thinking is that interest rates will go up because of inflation over the next 12 months.

“The rates are so good, why not look to fix at current rates – subject to people not wanting to move or do anything different? As long as they are comfortable staying in the family home it is a sensible option.”

simon.allin@ft.com