Homeowners in December were facing the holiday distractions and likely trying to cypher through the information on what to expect from the coming year. Fewer sought out remortgaging, but fewer home buyers were in the market as well. According to a statement by LMS CEO Nick Chadbourne, “Mortgage activity slowed in December as borrowers expect rates to drop in the new year.” 

Mr. Chadbourne added, “While all metrics fell in December, this is somewhat unsurprising. The quieter month was both seasonal and down to the fact that the majority of borrowers were holding out to see what the new year would bring. Those who did remortgage were looking for longer term security as is evident by over two thirds of them locking in five-year fixed rates.

“Moving forwards, we’re likely to see the market stabilise – the economy will likely steady in 2023 following the political volatility that dominated the last year. Mortgage rates are expected to reduce at the beginning of the year before settling back into previous dynamics against the base rate movements. Borrowers should therefore expect the first half of 2023 to bring the lowest prices for the foreseeable future and aim to lock these in while they still last.”

The December data released in the LMS Monthly Remortgage Snapshot reveals the following:

£240 average increase in monthly repayments for homeowners who remortgaged

43% of homeowners chose to increase their loan size

67% of homeowners who remortgaged chose a 5-year fixed rate product, which was the most popular remortgage product chosen 

35% of homeowners reported their main goal in remortgaging was to gain longer term security, this was the most popular response

For those expecting interest rates to decline, there has been a slight decrease recently in some interest rates offered by lenders. The decline comes as the demand for borrowing eased due to higher interest rates and likely the distraction of the holidays. However, there has been a slight boost to the housing market as more attention from hopeful home buyers has been reported. Lenders could be set to increase rates as demand grows. There is also the expectation of another interest rate hike in February which will change the current lending offers.

The Bank of England’s Monetary Policy Committee (MPC) last met in December and it resulted in a 0.50% increase to the standard base interest rate taking it to 3.50%. The next meeting is at the start of February on the 2nd. The result could be another 0.50% taking the rate to 4.0%. There is a forecast for the base rate to reach at least 4.8% in 2023 to rein in the growth of inflation. 

Homeowners are being encouraged to shop for a remortgage to avoid paying more than necessary when their mortgage terms end. A homeowner at the end of their mortgage term could remortgage or allow their lender to move them to their standard variable rate (SVR). The SVR would likely be a higher rate than what could be found with a remortgage, so savings could be found by shopping for a new deal. If the homeowner seeks out a fixed rate deal, they could lock in their chosen rate and avoid any further rate hikes.

It is expected that should the MPC increase the rate by 0.5% as has been the case in the majority of the past meetings so far, the demand for remortgaging could increase quickly for there will be another MPC meeting in March that could result in yet another rate hike. 

The decision to increase the rate and by how much will be determined by the committee members in response to the latest information on inflation which is due at the February meeting. The target rate of the Bank for inflation is 2.0% and the rate was reported in November at 10.7%. There is still a strong amount of influence required by the MPC to control inflation and bring it back to within range of the target rate.

Waiting for rates to drop as they did in the past few years in response to the economic impact of the pandemic could have a borrower missing out on securing a low interest rate. 

Homeowners desiring to take the advice of experts and shop for a remortgage could do so online to simplify the process. A quote could quickly be obtained by visiting the website of a remortgage lender. Visiting other lender websites would provide quotes to review and compare.

Shopping online with a remortgage broker could be even easier as a homeowner could obtain numerous quotes from a variety of lenders at one website and quickly compare and discover the best remortgage offer. Brokers often have exclusive deals, which would make shopping with a broker a smart strategy.

Homeowners looking to ease the stress of worry about rising rates could find relief in seeking out a remortgage, especially a fixed rate deal. Not only could they save against being tied to a risky and increasing SVR but avoiding any further rate hikes offers savings as well.