A five-year fixed rate was the most popular product type for refinancing borrowers in July, according to the LMS Monthly Remortgage Snapshot.
A two-year fix was the second-most popular choice for people refinancing, with 44% going for this option. Just 7% of borrowers chose a three-year fix, 2% went for a 10-year fix and 2% selected a tracker mortgage.
Only 2% of people chose a different kind of product from the aforementioned.
Nearly half of remortgagors increase loan size
Some 45% of people who remortgaged in July increased their loan size, by an average of £20,243. This aligned with 26% of borrowers saying the main reason they refinanced was to release equity from their homes.
Nearly a fifth – 19% – of borrowers reduced their loan size, by £15,561 on average.
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For the 68% of people who saw their monthly payments rise after remortgaging, there was a £367.03 average increase in costs.
Some 11% of remortgagors saw no change in their monthly mortgage payments, while 21% saw this reduce by £304.20 on average.
Nick Chadbourne, CEO of LMS, said Q4 was usually a busy time for product expiries, and this year was no different.
He continued: “The recent reductions in mortgage rates from a number of large lenders bode well for customers coming to the end of a fixed rate.
“But let’s remember that many of these customers were on historically low rates, so they are in for a bit of a shock – hopefully, the recent reductions soften the blow.”
Remortgaging for security
The vast majority – 71% – of people who chose a fixed rate deal when remortgaging in July did so to have security over their monthly outgoings.
A tenth selected a fixed rate as they were worried about the economic climate, while 12% were influenced by their broker.
Two-fifths of remortgagors predicted rates would rise over the next year, 13% said this would happen further in the future and 47% had no expectations for interest rates to go up.
This article is based on one that was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Remortgage activity rises by a fifth in July – LMS
