LMS has reported that remortgaging volumes reached an eight-year high in July.
Although transaction levels hit their highest point since September 2009 on a 12-month rolling average, they remain some way off their pre-crash highs.
Loan amounts are also on the up, reaching an all-time high of £171,421 in July.
Nick Chadbourne (pictured), chief executive of LMS, said: “Remortgaging volumes have been on an upward trend since the beginning of 2015 and the current 12-month rolling average shows an eight-year high. Growth has been driven by a combination of factors.
“People tracking rates to secure a fixed-rate deal ahead of a potential rate change over the summer, and a flurry of borrowers, correlating with a previous spike in the market. Back in the summer of 2016 interest rates hit a record low and people fixed on the rates available at that time on two-year deals.
“These borrowers are now reaching the end of their current arrangement and are returning to the market.”
LMS’s data also shows the number of borrowers consulting a broker when remortgaging has risen from 70% in July 2017 to 83% in July 2018.
Chadbourne said: “In an environment where so many products are available, more people are looking to mortgage brokers for advice. Our data shows that the number of remortgagors consulting a broker has risen to 83% – the highest we’ve come across.
“In the current landscape, it’s sensible to consult a broker to get the best deals, considering not only headline rates but the additional value of extras such as free legals. Brokers can help people make sensible decisions and select the right product to suit their individual requirements.”
The conveyancing service provider polled borrowers about their interest rate expectations prior to the Bank of England rate rise from 0.5% to 0.75%, finding that 71% of people expected the bank rate to increase within the next 12 months, up from 49% in July 2017 (although unchanged from May and June 2018).
The proportion of borrowers remortgaging to shorten their mortgage term fell to 2.3% in July 2018, down from 3.2% a year ago. This percentage is lower than the 2.9% recorded in July 2016 and has also fallen on a monthly basis, having registered at 2.4% in June this year.
Chadbourne said: “There’s a relationship between the volume of borrowers reducing their loan term and rate rises. As borrowing becomes more expensive, there’s less opportunity for people to shorten loan length as affordability gets stretched.
“In July, we saw a reduction in the number of cases where borrowers managed to lower rate and a decrease in those choosing to shorten term.”
The proportion of borrowers remortgaging to pay off debt fell to 11% in July, the lowest figure since the 10% registered in January.
With the interest rate rise finally occurring earlier in August, the number of remortgagors able to lower their mortgage rate last month also fell, with many lenders tightening their criteria ahead of the much-mooted move. In July, 77% of remortgagors managed to lower their rate, down from 80% in June and 89% in November 2016.
Reaching the end of a fixed-rate deal remains the most popular reason to remortgage, hitting 75% in July. Home improvements are a popular motivator, cited in 25% of cases.
Despite modest improvements in wages – with household income rising to £48,139 in June from £47,350 in May – inflation means that borrowers aren’t feeling any better off, and rising annual repayments are adding to a squeeze on affordability.
Average annual repayments rose to £9,380 in June, a significant hike from £8,636 in May and £8,071 last June. This means the current percentage of income accounted for by repayments has reached 19.5%, the highest level in two years and up from 18.2% in May.
Chadbourne said: “There were hopes that we had exited the latest cost-of-living squeeze, but the inflation rate rise in July, allied with the rising repayments our figures portray, show that consumers are likely to remain challenged in the current climate.”
