HOMEOWNERS are rushing to remortgage to take advantage of record low mortgage rates, new figures from the Mortgage Advice Bureau (MAB) show.
Remortgage applications jumped 24 per cent in January from December. Year-on-year, January saw a 17 per cent increase in remortgage applications. It compares to the 12 per cent climb in applications for house purchase.
Remortgaging can save borrowers an average of £2,304 a year, the MAB said. The figure equates to a 4.8 per cent pay rise for the typical borrower.
The lowest rate that can be locked in for a period of two years has dropped to 1.18 per cent, according to moneysupermarket.com. The mortgage is offered by the Yorkshire Building Society. Borrowing costs are being pushed down by a combination of the Bank of England’s low base rate and competition between lenders.
“The current price war has been intensified by fierce lender competition and a number of new entrants to the market. Specialist lenders are now going head-to-head with traditional competitors and eye-catching product launches have become commonplace, giving rise to historically low rates,” said Brian Murphy, head of mortgage lending at MAB.
The base rate is currently 0.5 per cent which the Bank of England recently said could be cut further to zero to fend off deflation.
Another boost to homeowners is the rise in house prices by 10 per cent annually in December. It has allowed those remortgaging to access lower loan-to-value (LTV) deals which are cheaper.
The typical applicant was able to put forward £133,719 of equity in January, a 14 per cent climb on last year, the MAB’s figures show. As a result, the average remortgage LTV was 54.9 per cent in January, down from 57.1 per cent this time last year.