Re-mortgages jumped in February as borrowers sought to beat interest rate rises with homeowners looking for new loans after just six months lifting by 30%, according to new data from the Legal & General Mortgage Club.
The study, drawn from the club’s SmartrCriteria tool that tracks product searches from over 8,000 advisers, “suggests that rises in the Bank of England’s base rate to curb inflation could be prompting borrowers to lock into low fixed-rate deals”.
The move comes as the Bank lifted interest rates three times in four months to 0.75%, and ahead of trailed rises in living costs that came into effect in April.
Energy bills jumped by an average of 54% this month along with rises in national insurance contributions and council tax bills, while inflation has lifted to 6.2% – sparked by post-pandemic costs and shortages sharpened by the war in Ukraine.
The club says: “While many consumers tried to manage their mortgage repayments, strong demand from buyers also continued despite rising inflation and other costs, particularly in the buy-to-let sector.”
Searches for first-time landlords rose by 23%, and searches for those with corporate lets grew by 28% in February, it adds.
The report says: “As house prices continue to soar and rising energy costs hit affordability, borrowers are becoming increasingly reliant on financial support from their loved ones to complete their purchase plans.”
Searches for those with gifted equity jumped by 119%, and searches from landlords with gifted equity climbed by 15%.
The study says broker searches for borrowers with gifted deposits rose by 6%, “perhaps suggesting that the cost-of-living squeeze has resulted in first-time buyers needing a bigger deposit for completion”.
The data also “suggests that families could be looking to alternative options to either minimise their monthly outgoings or free up cash to help their loved ones with a deposit as house prices rise and the Help to Buy programme enters its final year. Searches for interest-only mortgages grew by 33% in February”.
Legal & General Mortgage Club director Kevin Roberts says: “The cost-of-living squeeze and rising interest rates are clearly driving borrowers to remortgage and lock into low fixed-rate products that are still available on the market.
“Others are exploring alternative means of managing their finances, perhaps by taking out interest-only mortgages.
“Whether borrowers are looking for alternative solutions or simply want to lock into a fixed-rate mortgage for the future, advisers have a critical role to find products for these borrowers that can help them keep their monthly repayments low, while ensuring they have a mortgage that continues to meet their needs.”