Homeowners Hurry to Remortgage on Lower Fixed Rates
Recently released data reveals homeowners are switching to record low fixed mortgage rates in a bid to take advantage of the ongoing price war between lenders and the increased equity available on their homes. The firm Legal Marketing Services have divulged the fact that the amount of remortgage loans increased to 26,756 in January, which is 20% more than December 2014. However, this is a figure 7% lower than in January 2014.
The Mortgage Advice Bureau have suggested that customers can make huge savings over time by switching from the more costly standard variable mortgage deals to the cheaper fixed ones. This will cut their monthly cost and across the long-term, if the repayments remain the same figure, they could end up giving overpayments on their mortgage and save a huge amount of money.
The chief executive at Legal Marketing Services, Andy Knee stated: ìLast year was a mixed one for the remortgage market as the introduction of Mortgage Market Review and tighter controls from the Bank of England took their toll. A strong start to 2015 as people tackle their finances at the beginning of the year is a positive sign but we should not become complacent as challenges to the housing sector remain.î
He went on to report: ìFurthermore, the competitive rates available for remortgaging, couples with rising wages, means that repayments now account for just 18.8 of income- the lowest amount since January 2011. This combined with the current deflation of prices should further boost household spending power and contribute to confidence in the economy.î
Because of a significant decrease in the amount of gross mortgage deals in January, remortgaging makes up a significant sector of the home loans market- now at 28%. This is the largest share it has had since September 2013 and is 8% more than the preceding month.
The phenomenon is a combination of the mortgage rate price war and also the rise of house prices thus giving those with homes greater equity.
The record low mortgage deals are illustrated by Yorkshire Building Society who recently introduced a two-year fixed rate mortgage at 1.18% which is unprecedented for that bank. This was a headline grab to be the best deal on the market, just 0.01% lower than the deal offered by HSBC recently.
Further to this, the Office for National Statistics revealed that house prices went up by 10% in 2014 thus improving equity for homeowners. Data show that the average applicant was offering £133,719 of equity which is 14% greater than the figure for January of last year.
The head of mortgage lending for the Mortgage Advice Bureau, Brian Murphy, spoke optimistically about those looking to remortgage. He stated: ìMany borrowers on their lenderís SVR can effectively give themselves a pay rise that beats wage growth simply by remortgaging. Remortgaging is often less hassle than people think, and the savings gained by moving from an outdated product are well worth the effort.î
At present, according to data released by the Bank of England, the average standard variable rate is at 4.48% which means during a 20 year repayment period, the monthly payment averages out at £666. Now is the time to look around the remortgaging market and consider fixed rate deals that will save you huge amounts in long-run.