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Remortgage surge continues as rates fall further

Remortgage surge continues as rates fall further

Category: Mortgages

Updated: 28/09/2016
First Published: 28/09/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Remortgaging activity has seen a definite spike in recent months, driven by record low rates
and rising house prices, which have encouraged homeowners to reconsider their finances and see if they can snap up a better deal. So much so, that the number of remortgaging transactions has risen to the highest level seen in over seven years!

That's according to new figures from LMS, which show that the number of remortgages advanced totalled 36,195 in August. This marks an increase of 8% from July (33,400) and a whopping 45% year-on-year, and means that remortgage activity has reached its highest level since July 2009.

This highlights the level of motivation to remortgage at the moment, and our own figures back this up. The average standard variable rate (SVR) has fallen by 0.09% this month to stand at 4.71%, which means that the gap between the average mortgage rate of two years ago (3.54%) and the current SVR stands at 1.17%.

This may be a six-month low, but when faced with the prospect of seeing a 1.17% rate rise by reverting, or a rate cut of 1.10% by remortgaging to the current average two-year fix of 2.44%, it's a no brainer! Those who are already on a standard variable rate could benefit even more, and with it being possible to secure a two-year fixed rate mortgage for as little as 0.99%, the savings could be huge.

Indeed, additional figures from LMS revealed that 11% of homeowners who remortgaged in August were able to cut their monthly repayments by more than £500, so now's clearly a great time to see what's out there!

Caution remains

However, despite the rise in remortgage transactions during August, the value of those transactions has taken a dip, with the overall value of gross remortgage lending totalling £5.9bn for the month – a drop of 2% from £6bn in July.

This was driven by the average remortgage loan amount falling by 6%, from £172,184 in July to £162,268 in August, which could suggest that homeowners "are exercising a degree of caution", the report noted. This is backed up by the finding that the average remortgage loan-to-value (LTV) has fallen from 58% to 54% month-on-month, while those who remortgaged in August released £31,589, a drop of 11% from the previous year when the average amount released stood at £35,590.

This suggests that, rather than looking to increase their loan size by any extent, homeowners are conscious of the uncertainty in the economy and simply want to access cheap deals while reducing their loan-to-value at the same time.

Andy Knee, chief executive of LMS, offers further explanation: "The Bank of England's decision to cut the base interest rate continues to have a positive impact on the remortgage market [and] has encouraged a greater number of homeowners to remortgage their homes.

"However, in spite of this rise, homeowners appear to be in a more cautious mood than last month; borrowing less in the wake of a couple of turbulent months, both politically and economically, and lowering their LTV in the process."

This means that, despite a greater level of activity, the value of gross remortgage lending has actually fallen for the first time since May 2016. Nonetheless, Andy concluded that there was still "plenty of incentive for more people to consider acting before the year is out," and we happen to agree.

Mortgage rates remain at record lows, and having the chance to lower your repayments and even your LTV offers the ideal combination. So, check out the top remortgage deals and fixed mortgage rates to see if you can add to the remortgage surge.

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.