Demand Increasing for Mortgages and Remortgages as Interest Rates Increase
The scramble to buy a home and for homeowners to remortgage is in full swing. Lenders are increasing the interest rates on their offerings. Though the replacement offerings are still low, in an effort to grab the cheapest deal available borrowers are looking to get a mortgage deal now.
Brian Murphy, head of lending for the Mortgage Advice Bureau, said: “Demand remains strong and it has been a strong first quarter for mortgage activity. Despite rising rates and the end of the stamp duty holiday in March, the number of mortgage applications for both purchase and remortgage increased again last month.
“Consumers are increasingly switching to fixed-rate mortgages. This suggests many are expecting further rate rises and are eager to lock into attractive deals as soon as possible.”
Lenders are raising their interest rates despite the Bank of England’s Monetary Policy Committee leaving their standard base interest rate steady at 0.5 per cent. They are not expected to increase the rate in their meeting next month in May nor throughout the rest of the year.
Kevin Morgan, managing director of Hertfordshire-based Consilium Financial Planning, remarked, “I’m not surprised with the increase as there’s been a steady demand for mortgages across the board. With interest rates as they are, many are saying it’s not sustainable long term, and that being so maybe there’s a bit of fear factor out there and a rush to get on board now.
“I think the rental market is unattractive at the moment but the catch-22 for many is that they are priced out of renting and too high a risk to be considered for a mortgage. For those who are low risk, there are a few good deals out there so maybe that is also fuelling the demand.
“I’m also detecting mortgage rationing out there so, yes, there is an increase in demand as culturally we want to own our own homes in this country, but a rise in interest rates could put a dampener on that.”