Panicked homeowners spend to lock in cheap deals

Homeowners have raced to get ahead of banks increasing the cost of mortgages, paying thousands of pounds in penalties to leave deals early.

Mortgage brokers reported a surge in borrowers eager to remortgage as lenders pull their lowest rates from the market. The number of fixed-rate sub1pc mortgages has fallen by more than 85pc in less than two months, from 131 to 19, according to data published by financial analysts Moneyfacts.

Borrowers looking to remortgage accounted for 45pc of market activity in October, up from 36pc in the same month in 2020, according to Mortgage Brain, a technology company used by more than 11,000 brokers. This increased to more than 53pc in the first week of November.

Remortgaging usually increases at this time of year, but brokers attributed the higher-than-normal surge to cheap deals quickly disappearing.

Weekly remortgage inquiries at London and Country Mortgages, Britain’s largest broker, have risen 50pc since September. The firm’s David

Hollingworth said: “There is no question lenders pulling deals before borrowers’ eyes has triggered a rush to lock in lower rates.”

Chris Sykes, of broker Private Finance, said: “We have had a few existing clients wanting to pay early repayment charges to lock in better rates.” One client, with a loan worth more than £ 1m, paid £ 50,000 to switch to a 15-year fixed deal instead.

“It can make financial sense for a borrower to lock themselves in for the long term on a cheap rate that won’t be available when their current fixedrate deal expires. There is no need to panic, but it is always worth reviewing what is possible, especially if your early repayment charges are minimal and your current rate is 2pc or more,” Mr Sykes added.

In the run- up to an anticipated interest rate rise by the Bank of England last week, which ultimately failed to materialise, lenders have been increasing rates on fixed-rate mortgages. No banks asked by Telegraph Money signalled they would reverse these increases.

Since then, lender TSB has pulled its two-year tracker mortgages for first- time buyers and borrowers remortgaging and raised rates by up to 0.45 percentage points on some two-year and five-year deals.

Experts predict the cost of mortgages will continue to rise in the coming weeks and into next year.