The number of remortgages completed in July was 20% up on the previous month, as nearly half of borrowers opted for a five-year fix, data from a conveyancing provider found.
The LMS Monthly Remortgage Snapshot showed that a five-year fixed rate was the most popular product type for refinancing borrowers in July.
A two-year fix was the second-most popular choice for people refinancing, with 44% going for this option. Just 7% of borrowers chose a three-year fix, 2% went for a 10-year fix and 2% selected a tracker mortgage.
Only 2% of people chose a different kind of product from the aforementioned.
Shifting back to remortgages
The LMS data also showed there was a 26% rise in instructions for remortgage in July.
Nick Chadbourne (pictured), CEO of LMS, said Q4 was usually a busy time for product expiries, and this year was no different.
He added: “Looking further ahead, I feel we are on the cusp of some meaningful activity. We expect a 15-20% increase in product changes next year, and with the automation and improvements in remortgage conveyancing, we may see a move away from product transfers and a shift to full remortgage switching.”
The overall cancellation rate for remortgages increased by 26% month-on-month, while there was a 3% fall in the case pipeline.
Nearly half of remortgagors increase loan size
Some 45% of people who remortgaged in July increased their loan size, by an average of £20,243. This aligned with 26% of borrowers saying the main reason they refinanced was to release equity from their homes.
Nearly a fifth – 19% – of borrowers reduced their loan size, by £15,561 on average.
For the 68% of people who saw their monthly payments rise after remortgaging, there was a £367.03 average increase in costs.
Some 11% of remortgagors saw no change in their monthly mortgage payments, while 21% saw this reduce by £304.20 on average.
Chadbourne said: “The recent reductions in mortgage rates from a number of large lenders bode well for customers coming to the end of a fixed rate.
“But let’s remember that many of these customers were on historically low rates, so they are in for a bit of a shock – hopefully, the recent reductions soften the blow.”
Remortgaging for security
The vast majority – 71% – of people who chose a fixed rate deal when remortgaging in July did so to have security over their monthly outgoings.
A tenth selected a fixed rate as they were worried about the economic climate, while 12% were influenced by their broker.
Two-fifths of remortgagors predicted rates would rise over the next year, 13% said this would happen further in the future and 47% had no expectations for interest rates to go up.
Shekina is the deputy editor at Mortgage Solutions and commercial editor at Mortgage Solutions and Specialist Lending Solutions. She has nearly eight years of experience in the B2B publishing market, having previously covered the hospitality, retail, pet, accounting and jewellery sectors.
Shekina has worked for Mortgage Solutions and Specialist Lending Solutions for almost five years. Here, she covers the market’s breaking news stories, engages with professionals in the sector, and oversees any commercially agreed content in partnership with mortgage-related companies.
This includes presenting webinars and hosting roundtable discussions on developing themes in the mortgage sector.
She is an NCTJ-trained journalist and was nominated for the Headline Money Awards Mortgage Journalist of the Year in 2021.
In her spare time, Shekina likes to read, travel, listen to music and socialise with friends.
She currently reports on current events in the mortgage market and liaises with financial clients to produce sponsored content.
Follow her on Twitter at @ShekinaMS
