"Consumer interest in fixed five-year deals has dipped as many borrowers opt for the lower rates on offer from two-year products. "
Five-year fixed rate remortgages fell to 37% of the market in February – down from 45% in the previous month.
Conversely, the proportion of borrowers choosing fixed two-year remortgages increased to 24% in February, up from 22% the month before. This is the highest level of two-year fixed rate remortgaging in seven months.
LMS says homeowners are also prepared to remortgage more frequently to get a better deal. In February 2017, 17% of borrowers expected to remortgage again in eight years’ time, but one year later, just 10% of borrowers expect to wait this long.
Meanwhile, 39% of borrowers are planning to refinance in five to six years’ time - an 11 percentage point increase from February 2017.
The long-term shift towards more regular remortgaging can be seen in the surge in total remortgage lending which reached a nine year high in January, increasing 20.3% year-on-year.
Nick Chadbourne, chief executive of LMS, said: “Consumer interest in fixed five-year deals has dipped as many borrowers opt for the lower rates on offer from two-year products. This is a significant shift from what we’ve seen in recent months, suggesting the popularity of five-year deals may have peaked.
“The move towards two-year deals is likely a result of borrowers offsetting the cost of November’s base rate increase by switching to a shorted fixed rate period when they remortgage. Few borrowers will want to risk a variable rate mortgage with potential increases to the base rate likely to be on the way later this year, but with incomes squeezed, demand for longer term fixed deals has slipped.
“In the short term, reports of Bank England’s upcoming rate increase is putting pressure on homeowners to move away SVR and remortgage sooner rather than later. The longer term increase in lending is due to borrowers being more aware of the potential savings on offer through remortgaging. There is now much more information on the deals available to borrowers from brokers as well as price comparison sites.
“The record high volumes of remortgage seen at the end of 2017 illustrates the ongoing challenge of developing a smoother, more efficient process. At LMS, we’re continuing to strive to deliver improvements with innovative technology such as ECOT. These improvements will provide all stakeholders within the conveyancing process more efficient methods of transacting.”
