Remortgage instructions fall in December as borrowers choose to up loan sizes

Remortgage instructions fall in December as borrowers choose to up loan sizes



Remortgage instructions decreased by 29% in December, while pipeline cases reduced by 7% month-on-month. At the same time, the overall cancellation rate reduced by 17%.

Nearly 60% of borrowers increased their monthly mortgage payment when they remortgaged their loan in December, with two-year fixed rates selected as the most popular mortgage deal.

Some 43% of borrowers increased their loan size while remortgaging and the average increase in monthly mortgage payments for homeowners refinancing in December was £281.90, according to the LMS Monthly Remortgage Snapshot.

 

Two-year fixed rates are popular choice

The LMS snapshot breaks down mortgage product choice by borrowers, highlighting that in December, 46% chose a two-year fixed rate, 44% opted for a five-year fix and 1% of borrowers chose a 10% fix and a tracker deal.

The majority of homeowners who chose a fix said they wanted the security of knowing how much they would be repaying each month.


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Reasons for remortgaging

For those choosing to increase the size of their mortgage when refinancing, the average amount of finance raised was £21,589.

Borrowers who lowered their mortgage balance when remortgaging did so by £12,419 on average.

The average remortgage loan amount in London was £364,213, while the average for the rest of the UK stood at £176,776, making remortgage loan amounts 106% higher in London than in the rest of the country.

The most popular goal when remortgaging was to lower monthly repayments, at 27%, followed by borrowers wanting to release equity from their homes, at 24%.

 

Borrowers reveal interest rate expectations

When asked if they thought interest rates would increase, 49% said rates would increase within the next year, 18% said it would be more than a year away and 33% said they do not expect rates to increase.

Nick Chadbourne, chief executive of LMS, said: “All signs have been positive through the back end of 2024; the homemover market has been buoyant, and remortgages bounced back towards the end of the year.

“However, has the new government stifled this positive outlook with their fiscal policies? Due to the changes with employer National Insurance and reversal of stamp duty, are we in store for another year of turmoil for the housing market?

“This time last year, financial markets factored in six cuts to base rates – we only saw two, and even up to just a few weeks ago, the expectation was three in 2025.

“At the time of writing, there’s concern over stagflation in the UK, and many experts are now only pricing in one rate cut this year.”

Chadbourne said he remains positive about the economic outlook, however.

“Whilst economic policy is mostly inflationary, we still have the base rate above inflation, and if history is a guide, this means we are in line for cuts. So, the beginning of 2025 isn’t completely devoid of hope, with 1.9 million [borrowers] coming off fixed rates, promising good deals to jump onto,” he added.





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