LMS: 5-year fixes remain most popular choice

Michael Lloyd

December 23, 2019

Nick Chadbourne LMS remortgage completions

Purchases of 5-year fixed rate products remained the most popular choice for borrowers remortgaging in November, the LMS Remortgage Snapshot has found.

The majority (96%) of those who remortgaged in November did so with a fixed rate product while just 2% of borrowers chose a variable or tracker rate mortgage.

Purchases of 2-year fixes decreased by 2% in November.

Nick Chadbourne (pictured), chief executive, LMS, said: “November saw a sizeable increase of 15.6% in the length of remortgagers’ previous deals as a wave of borrowers on 5-year fixed rates switched products.

“The first week of the month saw a peak in ERC expiries, and our data suggests that borrowers who previously held a 5-year deal were the most active, with the average previous remortgage length sitting at 62.71 months.

“We expect December to follow the same pattern as 2018, with the potential for increased activity now the future of the economy is more certain.

“There was a notably higher proportion of borrowers increasing their loan sizes, as 42% took out additional equity in November compared with just 24% who reduced their loan size.

“This could suggest that there is increased confidence in the economy and overall market conditions.

“It’s also not surprising that borrowers are taking advantage of low interest rates, with borrowers seeing a £7.48 reduction in their monthly repayments on average.”

Over half (55%) of borrowers expect interest rates to rise within the next year, whilst 28% predict that any changes are more than a year away.

LMS said this explains the consistent activity in the remortgage market, with homeowners looking for certainty over their monthly repayments in an unpredictable economy.

In November, 10-year fixes rose from 3% to 4% despite competitive rates on these products.

The total volume of remortgages dropped from 53,269 in October to 52,251 last month.

Some 45% of borrowers increased their monthly remortgage repayments, 14% saw no change and 41% reduced their repayments.

The average remortgage loan amount in London and the South East was £289,130 compared to the national average currently at £131,439.

The longest previous mortgage length was found in the North West at 68.61 months and the shortest was in East Anglia at 56.34 months.

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