Remortgaging soars as rate rises take their toll

The decision to hold the interest rates is a welcome respite as Spicerhaart Financial Services reveals that the recent succession of base rate rises has already taken effect.

Its monthly survey reveals a 50% increase in remortgages in May, as many borrowers look to secure last minute fixed rate deals at a preferential rate.

The Spicerhaart Financial Services monthly survey shows that remortgaging jumped 10% in May up to 28%, compared to just over 18% in April. Also, fixed rate mortgages remain the most popular as borrowers’ uncertainty over interest rate rises continue.

Steve Cox, Operations Director of Spicerhaart Financial Services, comments: “Rising interest rates have pushed up mortgage repayments and put a strain on consumer finances. This has resulted in a substantial rise in the proportion of borrowers choosing to remortgage their property to secure future monthly outgoings. Borrowers whose fixed rate deals were coming to an end also contributed to the increase in remortgaging, as they looked to secure a last minute short term fixed rate deal to protect themselves against further interest rate rises.”

Steve Cox continues: “It was the right decision to hold the base rate at 5.5% this month. The quarter rises in January and May are already causing affordability issues for some borrowers. Inflation has been checked and the Bank of England announced that mortgage approvals fell to a year low in April. Further increases in rates would obviously have a negative impact on the housing market.”

Short term fixed rate deals remained the most popular, with 56% of borrowers opting for these products. However, the percentage of four to five year and longer term fixed rates also stayed high at a combined 24%, as borrowers planned for longer term financial security.

The Spicerhaart Financial Services survey also shows that the proportion of high loan to value loans has risen for the forth consecutive month to a peak of 18%, up from 16% in April.

The growing trend of customers borrowing at least 95% of the value of their property is the result of the constant level of first time buyers, who are determined to get a foot on the property ladder in spite of affordability constraints.