Homeowners are expected to show strong demand for remortgaging in the coming year. With low interest rates available, homeowners keen to save money will keep an eye on opportunity as it arrives at the end of their current mortgage term. Rather than pay more than needed on their monthly repayments, a remortgage could offer substantial savings for the term of a fixed rate deal, and studies have shown that a remortgage could save with a low interest rate half of what might be found on a lender’s standard variable rate (SVR) should they choose not to remortgage.

According to data from LMS, remortgaging is on the rise. In December, the volume increased 7.7%.

Nick Chadbourne, CEO of LMS, remarked, “December’s data shows that instruction volumes are increasing again, following a fall in November which was largely fueled by more borrowers opting for product transfers. It is promising to see this uplift, but high levels of PTs paired with record numbers of purchase transactions continue to impact overall volumes resulting in a lower number than what we would expect to see in December.

“We anticipate a reversal of 2020 trends in the second half of 2021, with remortgages taking the lead as the purchase market slows. There are signs that lenders are planning for this switch, reintroducing 90% LTV products and increasingly competitive remortgage products. Some savvy borrowers are already cashing in here, with our data showing borrowers who are shopping around for the best deals are decreasing their monthly payments by an average of £236 a month.

“Alongside this, our consumer satisfaction survey revealed 41% of borrowers expect an interest rise within the next year. This is the highest percentage of borrowers to expect an increase in interest rates since August. It is likely this expectation signals of a lack of consumer confidence in the future economy rather than a genuine concern that the Bank of England will increase lending rates, given the recent predictions of a negative rate on the horizon.

“Nonetheless, these concerns are affecting purchasing decisions. Lack of consumer confidence is motivating borrowers to secure a good deal while they can, and they are locking in the low rates for longer terms. More than half (55%) chose a five-year fixed rate, 6% more than in November, and 9% more than August. An increase in longer-term products will lead to fewer ERC expiries in coming years which will have a knock-on effect for future volumes.”

Homeowners are encouraged to shop around early for a remortgage. Doing so online is simple and fast, and can help a homeowner discover the savings possible. Homeowners should take action quickly once they find the best remortgage for their needs. The process could be slower than usual and even encounter disruptions as the pandemic still impacts business and that includes the lending market, so that they can secure the deal soon and start saving money.