Monthly remortgage payments rise by £317 as borrowers stick with five-year fixes
Those remortgaging in May are paying more than £300 post refinancing. Meanwhile, half of the people who remortgaged last month went for a five-year fix, making it the most popular product choice, according to new analysis.
According to the LMS remortgage snapshot for May, borrowers’ monthly payments rose by £317.20 on average after refinancing.
In term sof product choice, half went for five-year fixes, 29% went for a two-year fix and just 1% chose a 10-year fix. A tenth of people selected a tracker deal.
The reason why people went for five-year fixes could be explained by their expectations for interest rates in the future. Some 79% of respondents predicted that rates would rise in the next year, while 6% said this would happen more than a year in the future.
Two-thirds of people saw their monthly mortgage payments go up, while a quarter reduced their bill.
Reasons to remortgage
Reducing monthly payments was the main purpose of remortgaging in May, as 29% of people said this, making it the most popular response. Of those who did lower their payments, their monthly bill fell by £284.32.
The second most popular reason for remortgaging was to release equity, as stated by 22% of respondents.
Some 18% said it was to lock in a good deal and give themselves long-term security.
Pipeline to swell in second half of the year
Nick Chadbourne, CEO at LMS, said the remortgage pipeline would “swell” in H2 as it was predicted that over half a million people would be refinancing.
He added: “As predicted, instructions increased again in May following a seasonal dip the month before. Until now, we have seen a lot of people stay on variable rates in the hope that, if they stick it out, rates will fall. However, the base rate increased to 4.5% early on so it’s not a huge surprise that people looking to remortgage when their product expires are aiming to come off standard variable rates for more stability.
“As we head into the second half of the year, we expect a big jump in instructions and the pipeline to swell. It will be the busiest in terms of product expiries since the 2008 credit crunch with well over half a million people expected to remortgage.
“Anyone doing so may well choose a two-year fix in the expectation of a lower rate next time. If the market predictions are correct, this would be wise as rates will likely come down during 2024.”