Remortgaging levels reached highest level for over a decade in July

Homeowners up and down the country flocked to secure cheap remortgaging deals ahead of the Bank of England’s interest rate hike this summer.

In July, there were 46,900 remortgages completed, marking a 23.1 per cent increase on the same month a year earlier, figures from UK Finance show. 

With so many homeowners rushing to get a good deal before August’s hotly anticipated rate rise, residential remortgaging levels reached their highest for over a decade.

Beating the hike: In July, there were 46,900 remortgages completed, UK Finance says

In July alone, £8.7billion worth of remortgaging deals were completed, marking a 26.1 per cent increase year-on-year.

On 2 August, the Bank of England’s Monetary Policy Committee voted to raise interest rates from 0.5 per cent to 0.75 per cent, which is the highest they have been since March 2009.

While the decision may have been good news for savers, it also meant that around  3.5million people with variable or tracker mortgages would start paying more. 

While many banks and building societies were quick to publish new higher mortgage rates in light of the interest rate increase, they have been far slower out of the starting blocks when it comes to boosting deals for savers.  

Numbers: Remortgaging activity across the UK since July 2017, according to UK Finance

Numbers: Remortgaging activity across the UK since July 2017, according to UK Finance

UK Finance’s figures also show there were 14,700 new buy-to-let remortgages completed in July, marking a 7.3 per cent increase from the same month a year earlier.  

Jackie Bennett, director of mortgages at UK Finance, said the ‘considerable’ growth in buy-to-let remortgaging showed that ‘while recent tax and regulatory changes are impacting on new purchases, many existing landlords remain in the market.’

In the first-time buyer market, there were 31,400 new mortgage deals completed in July, which is only 1 per cent more than at the same point a year ago. 

The average first-time buyer is 30 and has a gross household income of £42,000, UK Finance said. The average loan dished out to first-time buyers is around £145,000.

Ms Bennett said: ‘The number of first-time buyers has returned to modest year-on-year growth.

‘However, affordability remains a challenge for many prospective borrowers, underlining the importance of clarity over the future of schemes such as Help to Buy.’

Rising trend: UK Finance's figures show there were 14,700 new buy-to-let remortgages in July

Rising trend: UK Finance’s figures show there were 14,700 new buy-to-let remortgages in July

Earlier this month, it was reported that the government wants to axe Help to Buy schemes, with critics of the initiatives claiming they drive up property prices and are helping the wealthy.

Unsurprisingly, housebuiders, many of whom have seen their profits boosted by sales in the Help to Buy market, want the schemes to continue and are calling for clarity as to when they may end or be extended to.

Commenting on today’s UK Finance figures, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘August’s interest rate rise was well-flagged in advance, with many borrowers taking the opportunity to re-mortgage onto a fixed rate and save themselves from a hike in mortgage payments.

‘Lenders continue to court re-mortgage business into the autumn, with Barclays one of a number of banks cutting pricing on its re-mortgage products.

‘On the buy-to-let side, re-mortgaging is also proving popular, with landlords keen to maximise as much profit from their portfolios as possible to offset increased tax charges.

‘The sector has not lost its appeal to many existing landlords but taking a close look at how portfolios are run is a smart move.’   

Jeremy Leaf, a north London estate agent and former RICS residential chairman, said: ‘The level of remortgaging is not surprising given the imminent and well-signposted rise in interest rates. 

‘However, what is of more concern is that although their numbers are rising, first-time buyers have been unable to take advantage of the reduction in buy-to-let activity. 

Further hikes? The Bank of England is not expected to raise interest rates again on Thursday

Further hikes? The Bank of England is not expected to raise interest rates again on Thursday

‘Homeowners have also been reluctant to jump into the market, even in the traditionally busier spring buying season, although on the positive side there is no sign of any major corrections.’ 

The Bank of England is voting on whether interest rates should be increased or stay the same on Thursday. Most analysts think interest rates will stay the same, with 9-0 voting in favour of maintaining the status quo.

Kevin Roberts, Director, Legal & General Mortgage Club, said: ‘Regardless of the Bank of England’s decision tomorrow, the era of low interest rates will not last forever. 

‘Those coming to the end of their mortgage term, or indeed seeking their first mortgage, should speak with an adviser now to secure a good deal while rates remain at near record low levels. 

‘Not only will advisers be able to provide a far wider range of products, but they can also give buyers the guidance and support they need when planning their first or next step on the housing ladder.’