Figures for March released by the Council of Mortgage Lenders (CML) showed that 26,600 homes were re-mortgaged during the month, an increase of 19% from February and up 4% on the year before.
With a total value of £4.2bn, this level of re-mortgaging clearly demonstrates a healthy appetite amongst homeowners to seek out better deals. A recent survey by Nottingham Building Society suggested that one in six homeowners will look to re-mortgage their house in the next six months. So, why are so many people looking for new mortgages for their properties?
Whilst the Standard Variable Rate (SVR) has slowly crept up half a percent to 4.5% over the last five years, fixed rates have generally tumbled over the same period. Since 2010, statistics from the Bank of England reveal that average five-year fixed rates have fallen from 5.5% to under 3%, and two-year fixed rates have dropped from 4% to less than 2%.
With some banks now offering two-year fixed rates under one percent, homeowners can currently save an average of almost £100 a month if they choose to re-mortgage. Moreover, with Bank of England base rates only likely to increase from their current levels of 0.5%, everything seems to be pointing in favour of people taking out new deals. Borrowers who take out low-rate, fixed mortgages for a number of years can shield themselves against any potential increase in interest rates in the future.
People staying put
Statistics from the CML suggested that homeowners are now moving less frequently, meaning that their length of stay in their homes is becoming longer. Peter Williams, the Intermediary Mortgage Lenders Association’s executive director, commented:
“The fact that people are staying put for longer and mortgage pricing is at record lows gives people added incentives to reassess their existing loans…”
In simple terms, the longer people live in their properties, the more likely they are to reassess their lending on them.
Increased consumer consideration of mortgages
According to the Office for National Statistics, in 1990 nearly 70% of mortgages were 25-year loans. By 2012, this figure had dropped to 27%, whilst the prevalence of both very short and very long-term mortgages increased over this period. This suggests that people are taking an increased interest in their mortgages, and are no longer settling for the first deal offered to them.
Mortgage professionals should be aware that borrowers have access to more information and offers than ever before, and as a result are becoming increasingly likely to challenge lenders over what they can offer.