The number of people remortgaging in the UK increased by 34% in February, an eight year high of almost 44,000 in a single month according to the latest data.
Low interest rates and the opportunity to lower monthly repayments encouraged more people to remortgage, according to the data from conveyancing service provider LMS.
However, half of those remortgaging believe that rates will rise in the next 12 months and the value of remortgaging fell in February, down from £7.1 billion in January to £6.8 billion with a decline in the average loan size by £7,347 to £154,138.
The data also shows that total mortgage lending fell by 8% which meant that remortgaging accounted for 37% of total lending in February, the biggest amount since March 2011.
The upsurge in the number of remortgages is the combined result of low rates, down from 2.15% in December 2016 to 2.05% in January, and the will of remortgagors to lower their monthly repayments with 20% managing to do so in February.
Despite the rise in the number of people remortgaging, affordability worsened. In January, the repayment as a percentage of total income rose month on month from 16.9% to 17.8%. The report says that this will concern home owners who already face tightening purse strings as a result of rising inflation, which hit 2.3% in February.
Anticipation of a rate rise remained high in February with 49% saying that they expect a rate rise within the next year but the same percentage believe rates will remain the same. However, this follows months of speculation and false expectations of a rate rise, stretching back to the final months of 2016.
The number of home owners who said they will wait more than eight years to remortgage increased from 11% in January to 17% in February. It suggests that the combination of worsening affordability, continued expectation of a rate rise and an increase in the number prepared to wait more than eight years to remortgage again indicates that the road ahead for the remortgage market may be rocky.
‘February enjoyed the biggest boom in recent remortgaging history. Remortgage transactions rose to their highest level in eight years as home owners took advantage of continued low rates and the opportunity to lower monthly repayments,’ said Andy Knee, chief executive of LMS.
‘However, February also fired a warning shot. Affordability worsened, more home owners expect rates to rise and more are prepared to wait longer to remortgage again. Caution may well set in once again,’ he explained.
‘Meanwhile, inflation has risen to 2.3% and real wages are starting to fall. The consequence: home owners will have less in their pockets come the end of the month. Remortgaging can help alleviate a potentially difficult financial situation, for example, one in five reduced their monthly repayments by remortgaging in February,’ he pointed out.
‘With the macroeconomic climate expected to be more precarious from March onwards, home owners would be wise to take advantage of current conditions and remortgage now before it’s too late,’ he added.
