"People look to secure a new deal before rates rise even further"
Industry experts have been seeing an increasing number of homeowners deciding to remortgage as mortgage rates continue to climb.
Mortgage broker Knight Frank Finance has reported a significant 41% jump in the value of new remortgages it has written over May and June compared with the previous two months.
Similarly, data from the Bank of England showed a rise in approvals for remortgaging.
“There’s been a real shift in borrower behaviour over this last month,” Simon Gammon, founder and managing partner at Knight Frank Finance, was quoted as saying in a Financial Times report. “It’s changed to ‘oh my goodness, I’ve got to get one of these deals before they go even though I don’t like the rate’.”
Mortgage rates have been rising in the past several weeks due to a combination of factors, foremost of which are the persistently high inflation rate and increased swap rates. The Bank of England has also raised the bank rate for the 13th consecutive time from a record low 0.1% in December 2021 to the highest level it has been since the economy was hit by the 2008 global financial crisis.
As a result, average rates for both the two- and five-year fixes breached the 6% mark, returning to levels last hit in the aftermath of the disastrous mini-budget last year.
The average two and five year fixed mortgage rates are above 6% for the first time since November. #Mortgages #FixedRates pic.twitter.com/lYDEJdMwV8
— Moneyfactscompare (@Moneyfacts_couk) July 4, 2023
“As a business, May and June have seen steady levels of mortgage transactions,” remarked Graham Cox, founder of Bristol-based broker SelfEmployedMortgageHub.com. “However, we’ve seen a marked slowing down in new buyer interest over the past couple of weeks, no doubt due to the worsening inflation and base rate forecasts.
“Remortgage enquiries remain strong, as people look to secure a new deal before rates rise even further.”
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, added that there was a noticeable switch from new purchases to clients wanting to remortgage.
“We have to hope that the inflation data in August will be a significant step in the right direction to alleviate the pressure that’s building in the mortgage market,” he said. ‘If rates continue to rise, we could easily see house price falls between 10% to 15% from their peak last August.”
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