The latest figures from LMS show that demand for five-year fixed rate remortgages is back after a six-month dip, with 47% of the total remortgage demand recorded in April being for this type of deal. This is an increase from 36% the previous month, and shows that borrowers are increasingly concerned that mortgage rates will continue to rise in the short term.
Because of this, the demand for five-year deals is also 13 percentage points higher than it was in April last year, when it stood at 34%. Most of these borrowers are switching from two-year deals, whose rates have seen larger average increases of late.
Specifically, Moneyfacts Treasury Report data reveals that the average five-year fixed rate went up by just 0.01% from March to April, to sit at 2.91%, while the average two-year rate increased by 0.04% over the same period to reach 2.43%. Remember that at this time, it was still thought that base rate would increase in May, so providers were clearly hedging their bets by increasing their two-year offering but keeping their five-year deals as competitive as possible.
"The popularity of five-year fixed rate deals rebounded in April, having dipped in the first three months of the year," commented Nick Chadbourne, chief executive of LMS. "Lenders are eager to attract longer term business, which has created a competitive landscape for customers. This has ensured five-year average rates have remained relatively flat month-on-month. As more borrowers seek independent advice when remortgaging, the market is reacting quickly to the shifts in headline rates."
The average loan amount for remortgaging hit a record high in April as a result of all this activity, reaching £175,000 after a 9% increase on March. It's difficult to predict what will happen next, however, as it seems that due to the Bank of England keeping base rate on hold less remortgagors are now expecting it to rise this year, with the 77% who said they think it will rise being the lowest percentage in seven months.
Whatever happens, it's important for anyone coming to the end of their current mortgage deal to strike while the iron is hot. Who knows when rates will start to rise more substantially even in the five-year market? Why not have a look at the mortgage charts now to see if you can take advantage of lenders' desire for your business.
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 Any products featured may be withdrawn by their provider or changed at any time.