The Spectre Of Base Rate Rises In Late 2011 Is Fueling the Upwards Drive Of Remortgage Levels
The numbers of Brits remortgaging is set to rise in 2011 according to industry experts. The prospect of the Bank of England Base rate rising from its record low level of 0.5 per cent as well as rising inflation should encourage more Brits to switch their home loan this year, with remortgage levels already having increased by 28 per cent in the last twelve months.
With increased speculation that the Bank of England may raise interest rates it is no surprise that borrowers are increasingly turning to fixed rate remortgage deals. The Daily Telegraph recently reported that remortgages are up 5 per cent already in the first two months of 2011 and by over a quarter since the same time last year.
In February this year there were a little over 26,100 new remortgage deals arranged, just slightly short of the 16-month high from November 2010. With the Bank of England’s Monetary Policy Committee intimated strongly that it will have no choice soon but to raise interest rates, it is small wonder that the fixed rate deal is fast becoming a very popular option. 0.5 per cent rates can’t last forever.
The statistics director at the British Banker’s Association, David Dooks said: “The high street banks have seen more remortgaging activity of late as people look to fix costs.” Figures suggest that the sum total of all mortgage lending in the UK rose to £1.6 billion in January 2011, a figure that is above the average of the preceding six months. Howard Archer, UK economist at IHS Global Insight added: “Activity remains stuck in the doldrums, which seems highly likely to maintain downward pressure on prices in the early months of 2011 at least.”
With nearly nine in ten mortgage brokers expecting the Bank of England to raise interest rates in 2011, this is likely to have an effect on the numbers of people remortgaging. February figures from the Mortgage Alliance’s distribution indicator published in FT Adviser showed that over 75 per cent of directly authorised mortgage intermediaries expect rate rises to have a positive effect on the number of remortgages.
It has also become clear that lenders are becoming more open to remortgage business, something that they has not been seen in months. This is great news for those who have been stuck on high interest rates and who have been unable to remortgage for some time, as they are now able to get the remortgage loans that they have been waiting for.
TMA boss Phil Whitehouse was cautiously optimistic and said: “Directly authorised intermediaries feel the remortgage market has shown signs of life in recent months and will continue to grow, thanks to a number of market influences.”
Mr Whitehouse also believes that if interest rates do rise, it will have a big effect on the number of people looking to switch their home loan and on the number of remortgage approvals seen in the UK.
The outlook of mortgage brokers has recently also been reinforced by figures from lender First Direct. The bank found that 41 per cent of homeowners looking to remortgage in the next year would definitely do so if their payments rose by at least £100 per month.
On the other hand some borrowers who are comfortable on low standard variable rates are reluctant to remortgage immediately. Taking a fixed rate generally tends to result in a substantial increase in monthly mortgage repayments. So, whilst it may be a good way to save money in the long run, many home owners are reluctant to take on a greater degree of financial pain in the short run especially because of the difficult financial climate.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s
top sites for the latest remortgage rates and best remortgage deals.