Rate fears lead to more remortgages
ECONOMY: Fears of an interest rate hike led remortgaging to surge to its highest level for four years last month as borrowers continued to lock-in cheap fixed rate deals, according to new figures.
FEARS OF an interest rate hike led remortgaging to surge to its highest level for four years last month as borrowers continued to lock-in cheap fixed rate deals, according to new figures.
The British Bankers’ Association (BBA) said remortgaging rose nearly 29 per cent in July, helping push up the number of overall loans approved for home loans up by 15 per cent year-onyear to 77,451, with a total value of £12.3bn.
Figures also showed 46,033 mortgages with a total value of £7.8bn were approved for house purchase in July, up from £7.7bn in June and 11 per cent higher than a year earlier - marking the highest monthly figure recorded since February 2014.
Richard Woolhouse, the chief economist at the BBA, said: “Savvy homeowners are snapping up competitive deals before an expected increase in interest rates.”
Hunters estate agents, which has expanded nationally from its beginnings in York, said fear of an interest rate rise may be overstated and added that the UK’s housing market would benefit most of all from more properties being built.
Glynis Frew, the managing director at Hunters, said: “In our view, we feel that interest rates may not rise as much as expected as a result of recent activity and in particular the implications of the Chinese stock market, as the market needs to stabilise beforehand.
“In terms of borrowing there is still a great deal of control that is put in place by lenders for mortgages, and we feel that this is in the nation’s best interests, as it makes lending more responsible.
“As an estate agent with ambitions to become the UK’s favourite estate agent, we feel that it is not in our interests, or the nation as whole, to have people overstretched or borrowing more than they can afford.
“The best solution for the UK’s housing market is for more prop- erties to be built to meet the continuing shortage.”
The BBA figures showed the number of remortgage approvals leapt to 24,400 with a value of £4.1bn last month, up from 24,183 at £4bn in June. Total mortgage borrowing was £11.8bn, 11.5 per cent higher than a year ago.
A mortgage price war between lenders earlier this year saw many slash rates on their deals to the lowest they have ever offered, which has prompted borrowers to remortgage to secure cheap deals.
Interest rates have been at an historical low of 0.5 per cent for more than six years.
The Bank of England’s Governor Mark Carney said earlier this month that the likely timing of a rate hike was “drawing closer”, while fellow policymakers on the Monetary Policy Committee (MPC) have also signalled in recent weeks that rates will soon edge higher.
But the Bank has moved to dampen expectations that it could come as soon as this year and experts believe the recent stock market turmoil caused by China’s economic slowdown will see the UK enjoy rock-bottom interest rates for longer.
Charlotte Nelson, a finance expert at Moneyfacts.co.uk, said the cost of fixed rate mortgages has already begun to “creep up” despite rates remaining on hold for now.
She added that the average two-year fixed rate has increased from 2.76 per cent at the start of August to 2.82 per cent yesterday, while five-year fixed rate deals have also risen, increasing from 3.24 per cent to 3.29 per cent over the same period.
24,440 The number of remortgage approvals... with a value of £4.1bn