As the new year started, five-year fixed rate products were most popular among those remortgaging, accounting for 63 per cent of all completions in January.
Motivations for choosing a fixed rate centred around concerns about the wider economy and job security.
According to data from conveyancing services firm LMS’s monthly remortgage snapshot, most borrowers chose to prioritise security when it came to their monthly mortgage payments rather than opting for lower monthly repayments in the short term.
Some 31 per cent said it was because they were worried about the economy in the longer-term and wanted to lock in a rate now, while a further 31 per cent said it was because they were worried about their job security and wanted to lock in a stable rate now.
Based on LMS’s data of 767 respondents, 22 per cent opted for 2-year fixes while 2 per cent chose to lock-in for longer with a 10-year fix.
Just 8 per cent opted for a tracker mortgage.
LMS chief executive, Nick Chadbourne noted that instructions increased in January as interest rates continued to decline from the peak seen in October.
“As predicted at the end of last year, there was a spike in instructions for January. This is the case every year since December instructions are always seasonably low, but this year’s figures are higher than January 2022, showing that those who were holding out for better rates are starting to return to the market,” Chadbourne explained.
“With the increased completion rates following the festive period, the pipeline contracted but this was to be expected,” he added.
Looking forward, LMS expects that increased market activity is likely to continue, with mortgage rates falling below 4 per cent for the first time since September.
“This is despite the repeated Bank of England interest rate rises as these have already been priced into the market. As such, we expect to see instructions and the pipeline grow over the next few weeks as well as a rise in cancellations since borrowers who secured rates in December may well reapply at these more attractive rates,” Chadbourne said.
During January, average monthly mortgage repayments increased by £239, with 72 per cent of people who remortgaged seeing an increase in their monthly payments.
Some 10 per cent saw no change in their monthly repayments, while 18 per cent reduced their mortgage payments.
Following September’s "mini" Budget, fixed rates peaked at more than 6.5 per cent before falling back down again.