Remortgage rates cut in competitive market

Remortgage rates cut in competitive market

Lenders have responded to increased demand for fixed-rate remortgage deals by slashing rates, according to Moneyfacts.

Latest analysis from Moneyfacts showed the average two-year fixed rate remortgage now stands at 2.49 per cent, down from 2.53 per cent in November 2018.

Meanwhile, according to the latest borrowing statistics from the Bank of England, remortgage approvals rose to 50,400 in December 2018 from 48,900 in November. 

Article continues after advert

Rachel Springall, finance expert at Moneyfacts, said: "Remortgage customers who locked into a two-year fixed deal at the end of 2018 may have missed out on a cheaper deal, as the average rate continues to decrease, dropping by 0.03 per cent since January to stand at 2.49 per cent today.

"Yet those who waited may now save even more by moving off their SVR and instead locking into a two-year fixed deal. 

"Indeed, based on a £200,000 mortgage over a 25-year term on a repayment mortgage basis, the average monthly repayment on the average two-year fixed rate of 2.49 per cent would cost £896.23.

"When compared to the current average SVR of 4.89 per cent, this would see borrowers save £260.17 per month."

Kevin Roberts, director at Legal and General Mortgage Club, agreed competition between lenders remained strong.

He said: "With thousands of great mortgage deals on offer, many borrowers are taking advantage of this choice and remortgaging.

"Borrowers on an SVR or coming to the end of their existing mortgage term have the potential to save thousands of pounds in the process."

One of the best two-year fixed rate remortgage products currently available, according to Moneyfacts, is from HSBC at a rate of 1.64 per cent at 80 per cent loan to value. It has free legal fees and valuation and comes with a £999 product fee. 

But Barclays, Santander and TSB, also all cut the rates on their two-year fixed deals since the start of February. 

Nick Chadbourne, CEO at conveyancing service provider LMS, said: "As more lenders are reducing their fixed rates, there are plenty of opportunities for mortgage brokers to get in touch with clients.

"However, it’s not only short-term deals that are proving popular. LMS data shows that 38 per cent of borrowers in December opted for a five-year fix as they came to the end of two-year deals. 

"Longer-term fixed deals provide borrowers with greater certainty, and with digital innovation making the remortgaging process easier, faster, and more secure, brokers and lenders alike are well-placed to handle increasing demand."

But change could be on the horizon, said Ms Springall. 

She said: "Despite this increasing competition, as it stands the housing market is feeling the anxieties of economic uncertainty, with activity subdued based on the recent statistics from Nationwide."

According to Nationwide’s latest House Price Index, February’s annual prices were just 0.4 per cent higher than at the same time last year with the average home now valued at £211,304. 

Ms Springall added: "Borrowers must be aware that this current lending environment is unlikely to continue indefinitely and lenders could slow down this aggressive pricing if they see fit, meaning rates may rise as they did between March and November last year, when they increased by 0.14 per cent.