Home owners who remortgaged their properties in July lost no time in taking advantage of falling mortgage rates following the UK’s decision to exit the European Union (EU), a new report shows.
Some 63% of remortgagers lowered their mortgage rates last month, up by 7% from May and 43% acted to reduce monthly payments as cheaper deals appeared on the market in the wake of the Brexit vote, according to data from LMS.
With the exception of two-year variable products at 75% loan to value (LTV), Bank of England data shows average mortgage rates were lower across the board in July than was the case in May before the EU referendum took place with many falling to record lows.
The rate cuts meant that more home owners who remortgaged to reduce their payments enjoyed substantial savings. Just 28% of those who took this course of action in May saved £200 or more each month from their new deal. In comparison, 35% who remortgaged to reduce their payments in July reported a monthly saving of £200 or more.
The report says that the appetite for securing lower rates and reducing monthly payments in July came despite growing speculation of a base rate cut from the Bank of England, which ultimately occurred in August.
For the first time since tracking began in December 2014, LMS data shows that there were higher expectations of rates falling than rising in July. Among the 13% of remortgagers who expected rates would change in July 59% expected rates would fall compared with just 18% who felt this way in May and 29% in June, when the EU vote took place.
Despite widespread speculation over the economic impact of the UK’s vote to leave, the July data from LMS also shows little sign of a drop in consumer confidence in the remortgage market. The percentage of remortgagers increasing the size of their loan rose from 26% in May to 28% in July, while the percentage increasing their loan by more than £10,000 was unchanged from May at 19%.
Similarly, the percentage remortgaging to pay for home improvements increased slightly from 19% in May to 21% in July, while there was a two percentage point increase in those remortgaging to pay off other debts from 7% to 9%, potentially in a bid to stabilise their finances in the face of an uncertain economic environment.
‘The aftermath of the vote to leave the European Union has seen many mortgage rates tumble to record lows, a fact that has not been lost by home owners as many seek to take advantage of low rates. July’s figures show many people were keen to press ahead with plans to remortgage, regardless of growing speculation that a base rate cut might be on the cards,’ said Andy Knee, chief executive of LMS.
‘The Bank of England’s reduction of the 0.5% base rate to 0.25% is likely to offer an extra incentive to anyone considering remortgaging. Recent cuts may mean that rates don’t have that much further to fall, but even so, there are significant savings to be had in terms of monthly repayments. The prospect of an extra £200 or more to spare in their monthly budget will give many homeowners reason to weigh up their options over the summer,’ he explained.
‘Despite uncertainty in the immediate aftermath of the referendum, the property market very much remains open for business. The shabby savings rates on offer mean that, when it comes to raising money for home improvements or clearing other debts, many people will naturally consider the wealth they have gained as a result of sustained house price rises,’ he added.