The Bank of England has released the latest information on the housing market and the data reveals a 17-month high in mortgage approvals. Net mortgage approvals for house purchases increased in February to 60,400 from 56,100 recorded in January. The increase exceeded the expectation for growth to 56,500, which was the highest forecast since September 2022 when the Bank of England’s standard base interest rate was at 2.25%. 

The increase in mortgage activity is connected to the lower interest rates offered by lenders in February. The competitive lending environment that emerged for mortgage borrowers was unexpected as the Bank’s Monetary Policy Committee (MPC) had voted in February, the first meeting of the year for the rate setters, to hold the base at 5.25%. As one lender followed another in lowering rates, it was not long before there were mortgage offers below the base rate. 

According to the Bank’s data, the average interest rate on newly approved mortgages declined by 0.29% to 4.9% in February. This was the lowest level since August 2023.

Despite the growth recorded for February by the Bank of England, in a separate report released by Nationwide for the month of March, the average house price had declined from February by 0.2%. However, in a year-to-year comparison there had been a 1.6% increase over March 2023.

The MPC rate is at a 16-year high and has been held steady since September of last year. Due to the decline in the inflation rate reported in March from 4.0% to 3.6%, a base rate cut is expected in summer. The expectation is for there to be at least three rate cuts of 0.25% by the end of the year. The base rate would, if that were the case, close out the year at 4.75%. 

The optimism in the economy is expected to bring back home buyers as they could likely afford to climb onto the property ladder as interest rates decline and inflation lowers causing less of a burden to household budgets. Supply in the housing market is increasing as well, but asking prices are still elevated from the record-breaking highs that occurred during the pandemic buying frenzy.

The remaining strong demand in the housing market is good news for homeowners. Last year there had been a fear of a decline in the housing market that could cause a loss of property values that would plunge newer homeowners into negative equity. In negative equity, when a homeowner’s property value falls below the mortgage debt, the ability to remortgage is out of reach. 

Being able to remortgage at the end of one’s mortgage term is essential if savings are the goal. Without the ability to remortgage, the homeowner’s loan will be transitioned to the lender’s standard variable rate (SVR) which is usually a higher interest rate and due to being a variable rate is risky as it could change and rise with little notice. 

In the search for savings, experts warn a SVR should be avoided. A remortgage is not only normally a lower rate, sometimes half the level of a SVR, a homeowner could lock in their chosen interest rate with a fixed deal. This would give the homeowner security against rising rates, and lock in the monthly repayment levels throughout the length of the mortgage term, an ideal situation for those looking for a steady monthly repayment amount for their budget.

The state of the housing market an important sign of the strength of the economy. Even though homeowners might no longer be concerned about asking prices or mortgage deals, strong house prices reflect steady, if not rising, property values. Lower interest rates for home buyers exist alongside lower interest rates for homeowners at the end of their mortgage term shopping for a remortgage. So, despite no longer being in the market to purchase a home, the housing market matters to homeowners.

Homeowners coming to the end of their mortgage term within the next six months could remortgage without a penalty fee for ending their deal early. Even if they decide to wait, shopping current deals provides important information that could be helpful when a decision is needed. Homeowners already moved to a SVR could certainly benefit from shopping for a remortgage. However, no matter where a homeowner is on their current mortgage term, shopping for a remortgage offers valuable information. 

Remortgage shopping online requires no commitment and gathering remortgage quotes is fast and easy when visiting the website of a remortgage broker. They could offer numerous quotes from a variety of lenders, and possibly exclusive deals from lenders not offered from them directly to borrowers. The homeowner could also visit individual lender sites to gather quotes to review and compare to discover the best remortgage deal.

Homeowners should be aware the attractive deals available now are not due to the decision of the MPC, but rather lenders being competitive for the attention of borrowers. If the MPC cuts the rate three times as forecasted to 4.75%, it does not ensure offers will be as low as they are now. Competition will drop as demand increases, and therefore the need to compete for borrowers will lessen, and rates could actually rise above the then current base rate, meaning current rates might be the best of the year for those remortgage shopping now.