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Base rate expectation caused remortgage boost

Base rate expectation caused remortgage boost

Category: Mortgages

Updated: 15/11/2017
First Published: 15/11/2017

We know now that the base rate rise happened, but expectation of that rise had a significant impact on all kinds of financial markets in the weeks and months leading up to the announcement, and none more so than the mortgage market, with remortgaging activity seeing a particular jump.

Remortgage surge as purchasing falters

Figures from UK Finance show that September saw a surge in remortgaging fuelled by base rate expectation, as homeowners clamoured to fix to a cheap mortgage deal before rates started to rise. The number of remortgage loans advanced totalled 35,900 during the month, a very slight drop from 36,900 in August but 13% higher than a year ago, with the value of those remortgages totalling £6.4bn, an increase of 16% year-on-year.

Significantly, all other market sectors saw the value of activity drop on a monthly basis and only recorded small rises annually, while in terms of the number of mortgages advanced, first-time buyer and buy-to-let activity actually fell over the year.

The number of home-movers saw a particularly sharp drop on a monthly basis, down by 16.6% compared with August, while the number of first-time buyers fell by 9.9% over the same period, so purchase activity is clearly starting to wane. This would appear to match additional trend data from LSL, which shows that the number of property sales fell in September before dropping by a further 8% in October, as sales continue to slow.

Time to remortgage?

UK Finance's head of mortgage policy June Deasy said that remortgaging was "particularly strong" in September, "with borrowers seeking to lock into historically low interest rates in advance of the widely-anticipated rise in Bank base rate at the beginning of November".

She added that, over the last year, the number of loans for remortgaging has been higher than in any period since 2009, so the market is definitely enjoying something of a peak moment – and given how low mortgage rates have been, it's little wonder. So, is it time you got involved?

Now could certainly be the time to consider it, particularly given the base rate rise two weeks ago. Mortgage rates are already beginning to edge up, with average tracker rates rising by 0.20% so far this month and standard variable rates (SVRs) set to follow suit, so if you're not on a fixed rate mortgage deal – or if your fixed term is about to come to an end – it'll be worth comparing the options before rates have a chance to rise further.

Our own figures highlight how beneficial remortgaging could be. The data, based on figures as at 1 November, shows that the difference between the average mortgage rate of two years ago (2.67%) and the current SVR (4.60%) now stands at 1.93%, the highest variation seen since October 2008 (when it hit 2.02%). This means that, if you fail to remortgage and simply revert to your lender's SVR, you could see your repayments skyrocket.

Compare that with the current average two-year fixed mortgage rate of 2.33% and you'll soon see why remortgaging makes a lot more sense, but you may want to be quick about it. Not only could SVRs start to edge up now that base rate has risen, but so could fixed mortgage rates, with the average two-year rate having already risen by 0.13% from October, while the average five-year rate is up by 0.12%.

This means now's the time to take action if you want to stand the best possible chance of securing low repayments, so start comparing the best remortgage rates and top fixed rate deals to see what's out there and get on the remortgaging bandwagon.

What next?

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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