"Borrower purchasing habits reflected scepticism over the longevity of low rates and longer-term fixed rate products widened the lead once more."
Its analysis of remortgage activity across 2021 show that instructions increased through the year as borrowers shopped around for a better deal.
52% of those who remortgaged in 2021 took out a five-year fixed rate product, the most popular product in 2021.
Nick Chadbourne, CEO at LMS, commented: "Low interest rates dominated the headlines in H2 2021, and this is reflected in fixed term product purchasing habits. Five-year fixes continue to be most popular product, but we did see a short-lived spike in the popularity of two-year fixes in Q3 as borrowers were tempted by the record-breaking low interest rates for these deals.
"However, as rumours of a Bank of England base rate gained momentum in Q4, borrower purchasing habits reflected scepticism over the longevity of low rates and longer-term fixed rate products widened the lead once more. As rates continue to rise through 2022, the move away from two-year rates will continue.”
Remortgage activity picked up the pace in 2021, with a steady increase in both instruction and completion volumes after the stamp duty holiday extension was announced in March.
High levels of instructions and completions volumes continued to build throughout the year, with pipelines reaching a peak in Q4 in the lead up to a peak in ERC expiries on 31st December 2021.
Loan sizes were also impacted by an array of factors through 2021. At the start of the year, LMS saw an rise in borrowers looking to increase their loan size as confidence was buoyed by economic recovery and better than expected unemployment rates.
However, this optimism turned in the final quarter as consumer confidence waned due to rising inflation and increasing interest rates.
Nick Chadbourne added: "Rates will continue to rise in 2022 and lenders will change their pricing strategies, making it even more essential for borrowers to shop around to find the right deal. This, paired with such large volumes of ERCs in the second half of the year, will create a very busy remortgage market.
"Looking ahead to 2022, we will see the first effects of two major product purchasing events. Two-year fixes taken out when the property market reopened in 2020 will begin to expire, along with five-year fixes which were taken out in 2017, when 50% of all products were this type.
“This healthy pipeline of activity is set against another base rate increase, the ongoing energy crisis and the post-furlough job market. All of which will all play a part in activity trends."
