Much has been said about the boost in remortgaging, yet at its most basic level, motivation to switch has hit a six-month low – suggesting other factors at play.
New figures from Moneyfacts' latest UK Mortgage Trends Treasury Report, due to be published later this week, show that borrowers who took out a two-year fixed rate mortgage two years ago will now have less incentive to switch from their Standard Variable Rate (SVR) to a new deal.
This is because the average two-year fixed rate of September 2014 stood at 3.54%, yet the current average SVR has fallen in the last month to stand at 4.71%. This means that the difference between the two rates now stands at just 1.17%, the lowest it has been for six months, so those approaching the end of a fixed rate term may not see much of an increase in terms of repayments – which means they'll feel less of a need to remortgage.
So just what's caused the recent spike in remortgaging?
Well, the fact that mortgage rates themselves continue to fall could go a long way to explaining it. After all, borrowers may only see an average rate spike of 1.17% if they revert to their lender's SVR, but if they remortgage to one of the many low-rate deals on the market, they could see a significant drop in rate instead.
For example, it's now possible to get a two-year fixed rate mortgage for as low as 0.99%, which could make a substantial difference to repayments (this deal, from HSBC, may only be available to those with a 35% deposit, but given that remortgagors typically have a high level of equity, it could easily prove suitable).
However, there's also a chance that a slowdown could hit the sector, particularly given the ongoing level of uncertainty in the market and the economy as a whole. This could "making homeowners wary of making any big decisions", said Moneyfacts' Charlotte Nelson, which could lead to more being tempted to stay on their lender's SVR. This in itself may unnerve providers, and could mean they'll try to up the ante and boost competition even further.
Either way, it's a great time to consider your options, whether or not the motivation remains at headline level. "With fixed rates now at record lows, borrowers could find they are potentially missing out on saving hundreds of pounds by reverting instead of remortgaging. It is always worth taking a look to see if a better deal could be achieved."
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