Rush for remortgage deals before rate rise

BORROWERS are racing to remortgage and save hundreds of pounds ahead of anticipated interest rate rises.

The Bank of England is expected to increase the base rate again this week, from 1pc to 1.25pc, in a move that will again push up mortgage rates.

As a result, the number of searches for remortgage deals has surged by more than a third compared to the week before the last rate rise in May.

Remortgage searches by brokers rose from 106,000 in the seven days to May 2 to 142,948 in the past week, according to mortgage data firm Twenty7tec.

Banks and building societies have been quick to pass on higher costs to borrowers since the Bank of England made its first interest rate rise at the end of last year and it became more expensive for lenders to borrow money.

The average two-year fixed rate has risen from 2.29pc in November 2021 to 3.35pc this week, according to analyst Moneyfacts. Meanwhile, the average five-year rate has jumped from 2.59pc to 3.46pc in the same period.

If the base rate rose by 0.25 percentage points tomorrow and lenders matched the increase on fixed-rate deals, this would drive up the cost of repayments on an average £250,000 mortgage from £1,231 a month to £1,265 – more than £800 over the course of the two-year deal. However, lenders often raise their rates by far more.

Nathan Reilly, of Twenty7tec, said: “There are definitely periods of activity several days prior to the Bank of England’s decision when we see mortgage searches peak. Then there’s a lull just one or two days before the decision as customers wait for greater certainty, but as soon as the announcement is made levels pick up again.”

Borrowers have tried to lock in longer fixed-rate deals, with some paying thousands in exit penalties to end their current mortgage early.