Homeowners whose fixed-term mortgage deal ended in April saw their average monthly repayment increase by £300 on average after remortgaging.
Data released today from conveyancing services firm LMS showed that most borrowers remortgaging in April chose to lock-in longer term products, with 51 per cent of borrowers opting for a five-year fixed-rate product.
By comparison, 28 per cent of borrowers chose to go with with a two-year fixed-rate deal, while 13 per cent opted for a tracker product.
Just two per cent of borrowers settled on a 10-year fixed-rate product in April.
LMS chief executive Nick Chadbourne said activity in April was down largely as a result of the “anticipated Easter lull”, with instructions down 30 per cent.
“These seasonal trends always play a part in market activity, although we expect that there are also increasing numbers of borrowers opting for product transfers instead of remortgages amid the affordability squeeze,” Chadbourne said.
According to LMS, the most popular reason for borrowers to remortgage in April was to lower their monthly payments and as a result of this, many are more inclined to “bide their time and wait for better products to become available”.
This was reflected in the fact that pipeline cases decreased by 7 per cent month-on-month in April.
Chadbourne noted however that he expects both instructions and the pipeline to increase again in May.
“With the Bank of England raising the base rate to 4.5 per cent, more of those who are on trackers or SVRs will look to switch to a more competitive fixed-rate product and the introduction of innovative products such as Skipton’s 100 per cent mortgage will only encourage this further,” he said.
“Aside from that, lenders are generally relaxing their affordability criteria thanks to there being more economic certainty and confidence in employment and house prices, playing into the prediction of an increased pipeline,” he added.
In a move not seen in over a decade, Skipton Building Society brought a deposit-free mortgage to the market earlier this month.
The product is the first 100 per cent mortgage to return to the market since the great financial collapse of 2008.
While many brokers have praised Skipton for its innovation, some have warned that borrowers should proceed with caution due to concerns over the potential for negative equity.
jane.matthews@ft.com
