Rush from remortgagers to secure longer term deals

Rush from remortgagers to secure longer term deals

The number of people remortgaging on to five-year fixes broke a new record in September ahead of an expected rise in interest rates.

Two-fifths (42 per cent) of remortgagers opted for a five-year fixed deal in September, according to conveyancing service provider LMS.

The percentage of remortgagers fixing for five-years has now grown for seven consecutive months.

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Remortgaging is now more affordable than ever, with annual repayments falling to 16.4 per cent of total income - an all-time low.

In September alone, the number of remortgagors jumped by 13 per cent to 41,573 from August’s 36,700, while the value of remortgaging rose by 2 per cent to £6.6bn over the same period.

The Bank of England’s Monetary Policy Committee is widely expected to increase the base rate from its all-time low of 0.25 per cent when it convenes tomorrow (Thursday, 2 November).

Lenders have already begun raising their interest rates in expectation of such a rise, heralding the end of record-low mortgage deals.

Nick Chadbourne, chief executive of LMS, commented: “With 56 per cent of September’s borrowers fearing an impeding rate rise - a significant increase from the 45 per cent seen in August - anticipation of rate increases is driving this surge. 

“With mortgage rates the second-lowest on record, and remortgaging more affordable than ever, borrowers are taking the initiative to lock into these low rates.”

Brokers have previously told FTAdviser it is time for people to look at fixing for longer as the prospect of a rate rise draws closer.

Martin Stewart, director at London Money, said: “We are in an interesting part of the cycle right now. We have had years of inertia and it is hard to shake people out of that. The argument for longer-term fixes is more compelling now than at any time in the last six years.”

He added that brokers needed to have a detailed conversation about borrowers’ plans, as five-year fixes are unsuitable for people who may be looking to move house in two years.