November 2017 was the month in which the Bank of England (BOE) raised UK interest rates for the first time in over a decade. However, recent data from the UK’s central bank shows that it was also the month when the biggest number of remortgages were approved as home owners took advantage of still low mortgage interest rate deals.
The BOE data showed that some 53,922 applications for remortgage were approved in November. That was up from 51,956 in October and the highest level since October 2008.
And, separate figures also produced by the central bank, showed the average mortgage interest rate across all mortgages was at a low of 2.5% on November 1st. The average two-year fixed rate mortgage, meanwhile, was 2.14%, a hair above the 213% it had been in on October 1st.
“Remortgaging activity was strong during 2017 as home-owners sought to lower their mortgage debt costs and if UK interest rates rise only slowly as they’re expected to, its likely remortgaging levels will remain elevated during 2018, too,” said Newington Green estate agent, M&M Property.
Won’t mortgage rates follow BOE rates higher?
Yes, it’s likely that they will, particularly the standard variable mortgage rate that home-owners automatically revert to when their fixed rate deal ends. However, right now, UK interest rates are expected to rise only very slowly, possibly to around 1% by the end of the year.
If you agree a fixed rate mortgage deal now, then any rate hikes that occur during 2018 won’t apply to your payments until your fixed rate deal ends. However, if you’re not on a fixed rate deal then your repayments will probably rise over the course of this year.
That makes now a good time to look at your mortgage and consider whether or not you should make plans to remortgage or stay as you are. In many cases you can put things in pace to agree a remortgage six months before your fixed rate deal ends. And, you’ll secure the deal that’s available when you make the arrangement – not the deal that available when your fixed rate deal ends.
“Putting things in place ahead of time means you could end up with a great remortgage rate that looks even better once your current mortgage deal is up,” said Garrett Whitelock. “Keeping on top of your housing related finances can be time consuming, but ultimately it should save you money.”
Slow housing market weighs on mortgage rates
And, even though low UK interest rates are helping to keep average mortgage rates lower, there’s evidence to suggest a subdued housing market is weighing on those rates, too.
In January 2018, five lenders:
- Principality Building Society.
- Yorkshire Building Society.
- Coventry Building Society.
- Skipton Building Society.
Were all advertising mortgage rates of around the 2% mark with a deposit of 15%, according to the MoneyFacts website.
“Its true that mortgage interest rates are tied to UK interest rates, but they also need to be at the right level to win customers,” said Eden Harper. “If business is slow, one way to encourage more borrowers is to push mortgage rates lower, which is what appears to be happening at the beginning of 2018.”