Concerns that interest rates could rise sooner than markets currently expect has triggered an increase in remortgaging activity, a new study shows.
The number of remortgagors forecasting a rate increase has risen over the last 12 months, according to analysis carried out by conveyancing service provider, LMS.
There were 27,700 remortgages carried out in December 2016, up from 26,000 in the same month a year earlier.
In December 2015, 6,500 remortgagors said they anticipated an interest rate rise within the next year. LMS’ study suggests this rose to 10,800 in December 2016, an increase of 66%.
With the UK economy remaining remarkably solid and resilient and inflation now at its highest level since June 2014, many of those borrowers could have a point, as the Bank of England may soon be left with little choice but to increase interest rates, which have been held at a record low of 0.25% since August 2016.
The Bank of England raised its forecasts for the UK economy sharply higher in February, increasing the likelihood the next move in interest rates will be up not down.
The Bank used its latest outlook to predict the economy would grow 2% this year and unemployment would be much lower than previously thought.
Presenting the Bank’s forecasts, Governor Mark Carney said that plans for more government spending, stronger world growth and other factors had made policymakers more upbeat about the year ahead. He also conceded the Bank had been too gloomy on the prospects for consumer spending since the Brexit vote.
“Growth has remained resilient since the referendum,” he told the press. “The monetary policy committee expects growth to be stronger over the forecast period than in November.”
Earlier this month, top Bank of England policymaker, Kristin Forbes, suggested that interest rates may need to rise “soon” to keep inflation under control if the UK economy continues its “remarkably solid and stable” performance.
Addressing an audience in Leeds, Forbes said: “In my view, if the real economy remains solid and the pickup in the nominal data continues, this could soon suggest an increase in Bank Rate.”