Finance · 14 August 2019

Increase in remortgaging due to Brexit uncertainty

Brexit uncertainty leads to increase in remortgaging
Remortgaging properties is becoming more and more popular with homeowners.

Remortgaging has now reached a near-decade high, with many deciding to refinance to lock in low-interest rate loans due to concerns about Brexit.

The popularity of remortgaging

It has been revealed in data published by UK Finance, which represents the UK’s mortgage lenders, homeowners across the country remortgaged loans in October 2018 to the value of a staggering £9.2 billion.

This represents the highest monthly total since 2008, when the remortgaging value had reached £9.3 billion.

Equally, the number of remortgaged loans also hit a 10-year high at 50,500 in 2018, when the last highest amount recorded was 68,500.

Why is remortgaging at a 10-year high?

According to leading figures in the property finance sector, one of the main reasons remortgaging has regained popularity is a very competitive market, which is encouraging homeowners to lock in to low-interest deals. 

The market has become more competitive of late due to a high number of fixed-rate mortgages also coming to an end at around the same time, meaning many property owners have been searching for a new deal.

This has come as a surprise to some, who believe lenders would be less willing to compete with each other to offer the cheapest rate amidst the ongoing uncertainty caused by Brexit.

Growth in the remortgage market

Many analysts have noted that the remortgage market has grown rapidly in the past few years, which has filled a void for mortgage lenders in the wake of a stagnating housing market.

In addition, the increasing likelihood of rising interest rates has led homeowners to rush to sign up to new fixed-rate or other kinds of discounted remortgage deals before this occurs. 

Interest rates not the only thing that drive remortgage growth

However, it is not only the case that a growth in remortgaging is driven by attractive interest rates. It is also to do with current fixed-rate deals. There was a sharp increase in the number of homeowners who signed two-year fixed rate deals in 2016, which has had a knock-on effect on remortgaging rates in 2018, as these deals come to a close.

Nevertheless, this lifecycle of fixed-rate deals causing a spike in remortgaging loans isn’t anticipated to continue so often.

This is because it is becoming increasingly commonplace for homeowners to choose longer-term fixed rate deals of three to five years instead, as opposed to the more popular two-year fixed rate deal of recent years. This is partly because the cost of fixing rates for a longer period of time has reduced.

The uncertainty of Brexit has also led to more distressed properties unable to sell, unable to gain planning permission and unlikely to receive mortgages from mainstream banks. This has contributed to a notable rise in bridging finance and alternative finance, where property buyers are using finance to buy a property upfront, hoping to pay off the sum in around 12 months. The bridging industry has increased seven-fold since 2011 and is funding over £7 billion per year, creating a huge market of lenders and bridging loan brokers across the UK.

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