Remortgage Trend Should Continue Despite Interest Rate Remaining Unchanged

Remortgage Trend Should Continue Despite Interest Rate Remaining Unchanged

Remortgage applications are set to stay at a high level as warnings continue that the bank rate is due to increase.  Also, the offers from lenders when it comes to fixed rates have been higher than in weeks past.  The trend of more homeowners seeking a remortgage will more than likely be one that follows through to the middle of the year if not longer.

Remortgage Trend Should Continue Despite Interest Rate Remaining Unchanged

In 2020 remortgages reached a 13-year low.  Many homeowners that came off their mortgage deals just remained on their lender’s standard variable rate (SVR) and enjoyed a low-interest rate despite being on an SVR.  However, once talk began of an interest rate hike for the first time in almost two years homeowners decided it was time to grab a fixed rate deal.  The result has been a lot more remortgages.

Countrywide reported that on January 32 per cent of all mortgage applications were remortgages.  This was an increase of 5 per cent over December.  They reported an average deposit of 32 per cent and an average interest rate of 3.26 for the first month of the year.

“Overall, the reality is that for the last 2 years only those that have had to move have done so. Discretionary movers, who typically make up somewhere around half of all transactions are beginning to evaluate whether this is now the time to make a move”, said Grenville Turner, Chief Executive of Countrywide.

Remortgages increased due to homeowners being worried about the Bank increasing the interest rate, but the February meeting of rate regulators left it unchanged.  This was not an unexpected decision for analysts believe that while the rate is due to change this year it may be too soon to do so before public spending cuts and increased taxes have an impact on inflation.  A rate change too soon could cause recovery to falter as cheap borrowing is taken from consumers and businesses that need it.

Despite the rate remaining, for now, homeowners are still feeling an urgent need to secure a fixed rate now.  Lenders have been hit with higher swap rates, the cost lenders charge each other for borrowing, and that in turn has caused many lower fixed rates to be pulled.  In fact, most of the great deals that were available just 6 weeks ago have disappeared.  So, despite the rate remaining at 0.5 per cent for yet another month, the fixed-rate deals have not remained.  There is no guarantee that more will not be pulled or that rate levels will not increase.

Homeowners that chose a remortgage in December had better offers than those seeking them now, but the deals out there are still historically very good.  Many have become used to seeing extremely low-interest rates.  In comparison with years past a rate of 5 per cent would have been attractive.  What is important is that homeowners shop for a fixed rate or tracker rate remortgage that leaves them in a secure situation and saving money on their current mortgage.

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