High interest rates hit remortgaging as property market stalls

The number of homeowners remortgaging with a different lender is at its lowest level since 1999 as high borrowing costs cause turbulence.

With inflation stubbornly high at 6.7 per cent, the Bank of England is expected to hold interest rates at 5.25 per cent on Thursday, raising hopes they have peaked.

It left rates unchanged last month having raised them 14 times since December 2021 from 0.1 per cent.

But rates look set to remain at this level for some time with investors betting the first cut will not come until August.

The higher cost of borrowing has hit demand, placing a chokehold on the property market.

Inflation fight: The Bank of England is expected to hold rates at 5.25% on Thursday, raising hopes they have peaked

Just 20,600 homeowners had remortgage deals approved with a different lender last month as more people stay with existing providers because they would not pass the affordability criteria of a new one.

Mortgage approvals slumped for a fourth month in a row, to the lowest level since January, according to Bank of England data. 

Just 43,300 were approved in September as buyers hope rates fall back and prices continue to decline.

House prices have fallen by 1.1 per cent over the past year, says Zoopla, the property search website, as high mortgage rates have stifled buyer demand.

Lenders have been cutting mortgage rates since the Bank of England halted its streak of interest rate hikes.

However, many of those coming off fixed-rate deals still face a rise in monthly repayments as they are locked into higher deals. 

The average five-year fixed mortgage rate was 5.87 per cent yesterday, according to rates monitor MoneyfactsCompare.

Halifax, Nationwide and Santander all cut rates in October. 

The effective interest rate paid on new mortgages in September rose to 5.01 per cent from 4.82 per cent in August, says the Bank of England.

Alice Haine, of investment platform Bestinvest, warned rates remained expensively high for owners. She said: ‘Many people emerging from the cheap deals they secured before the tightening cycle are still facing a significant jump in repayments.’

The Bank of England is closely watching the jobs market to see where whether inflation pressures are persisting or starting to fade.

Governor Andrew Bailey has warned not to expect interest rates to fall until there is ‘solid evidence’ that inflation is slowing.

***
Read more at DailyMail.co.uk