British Homeowners Rushed to Remortgage as Interest Rate Increase Looms

Householders in Britain have been scrambling to avail fixed-rate mortgages before the expected interest rate rise on Thursday, which would lead to the first rise in monthly loan payments in a decade.

A “busy last few days” have been reported by staff at the big mortgage brokers. The is said that they are anticipating more calls this week as homeowners with loan that base-rate-linked try to protect themselves from the expected increase.

Banks and other loan providers have been dropping the best fixed-rate deals quietly before the announcement on Thursday by the Bank of England.

A 0.25% point base rate increase to 0.5 percent would add £22 per month to a typical £175,000 mortgage. The small increase would be a milestone, signalling an end to a decade in which payments have only decreased. It was estimated by one investment group that as many as 8 million Britons had not noticed an interest rate increase in their adult lives.

Paul Welch, who runs largemortgageloans.com which specialises in arranging loans that are above £500,000, said that there had been a notable jump in queries regarding remortgaging in the last 24 hours. One in fourteen borrowers has a mortgage of over £500,000.

“After a decade of low rates, remortgaging is becoming a hot topic again and clients are seeking our advice on whether to fix their mortgage rates now, before a prospective rate rise,” Welch said. “Although some mortgages have been pulled from the market, there are a number of options still available and money will be in the system at a lower interest rate for a few weeks to come. There’s still time to act but do it as soon as possible.”

The product manager at Bath-based London & Country Mortgages, Peter Gettins, agreed that things had improved in recent months. “Remortgage applications this month are already more than 20% up on September’s total, and 60% up on last October. There’s certainly been a substantial increase in inquiry levels, on the back of rate speculation, combined with lenders withdrawing products. We’re probably seeing withdrawals of deals from three or four lenders a day at the moment,” said Gettins.

Gettins said that those looking for five-year fixed-rate mortgages had been struck the hardest. “A couple of weeks ago the Yorkshire building society, HSBC and Sainsbury’s were all offering five-year mortgages [at about] 1.50%. Now, there are a handful left under 1.75%. It feels like we’re starting to see a domino effect where each withdrawal pushes a new lender to the top. They quickly get oversubscribed and in turn withdraw their deal, and so it goes on,” warned Gettins.

Rival broker John Charcol’s Ray Boulger, dismissed talk regarding a last-minute rush, mostly since borrowers who manage their mortgage actively had spent the past few months locking into “rock bottom” rates.

Earlier this month, a trade association that represents banks and other mortgage lenders, UK Finance, said that gross mortgage lending in August was up £1.2bn on the figure of July. £8.4bn has been borrowed by home movers – 18 percent more compared to the figure in July, while first-time buyers borrowed 16 percent more in August than the month before.

June Deasy, the head of mortgages policy of UK Finance, said that 2016 had seen the highest number of people that are remortgaging since 2009. “With mortgage rates close to historic lows and the likelihood of a rise in official rates moving closer, the popularity of remortgaging looks set to continue,” said Deasy.

Homeowners, however, have been in this situation before. Back in 2013, many householders shifted to more expensive fixed-rate mortgages prior to a similarly predicted rate increase, only for the Bank of England to stick with 0.5 percent. The next move was actually another cut, from 0.5% to 0.25%, in August 2016 in the wake of the Brexit vote.