There was a spike in remortgage completions ahead of the base rate rise

Michael Lloyd

September 5, 2018

Over three quarters (76%) of remortgage applications via intermediaries resulted in a completion during Q2 2018, up from 70% in the previous quarter, as activity spiked ahead of the Bank of England’s anticipated decision to raise interest rates above 0.5%.

The Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA) found for the second time in the last 12 months, the number of homeowners acting to protect themselves from the effects of higher rates and secure the most affordable deals on offer increased in the quarter.

This was directly before a much-anticipated, albeit modest, increase in the  Bank of England’s base rate.

Kate Davies, executive director of IMLA, said: “The last 12 months have seen the end of a decade of record low interest rates that many borrowers have become accustomed to.

“The Bank of England’s response to managing rising inflation had been widely anticipated by the industry and consumers, and it is inevitable that many borrowers will have sought to take advantage of opportunities to lock into very low-rate deals while these are available.

“While customers who remain on tracker and standard variable rates are having to adjust to a second increase in monthly loan repayments in twelve months, competition in the market remains strong and should ensure keen and competitive pricing.

“The enhanced affordability rules introduced in April 2014, following the Mortgage Market Review, were specifically designed to ensure that borrowers would be able to absorb rate increases without suffering detriment.

“For those who took out their mortgages before that date, some may be eligible for further support from the commitment, made by more than 90% of lenders in response to the FCA’s recent Mortgage Market Report to help borrowers switch to better offers.”

A similar spike in activity occurred in Q3 2017 – ahead of the first rate rise in a decade in November, from 0.25% to 0.5%.  At that time, 78% of applications led to completions, an increase from 59% in the previous year.

Data from UK Finance shows that 115,00 homeowner remortgages were completed in Q2 2018, with a combined value of £20.7bn.

The volume of remortgages in June alone increased by 8.4% compared to a year earlier, as homeowners prepared for the Bank of England’s decision.

Separate IMLA research suggested that more than one in 10 (11%) brokers expect the Bank of England to raise rates again before the end of 2018.

Although the majority see no change, more than a quarter of brokers (28%) predicted the remortgage market will continue to grow significantly in H2.

Elsewhere in the market, the picture was generally positive in Q2 2018, with nearly nine in 10 (88%) of all mortgage applications leading to offers. The vast majority (95%) of brokers reported having a confident outlook for the mortgage industry.

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