The Spectre Of Base Rate Rises In Late 2011 Is Fueling the Upwards Drive Of Remortgage Levels by Timothy Frodsham

Mortgage experts believe that rising inflation and the prospect of increased interest rates will result in an increased level of remortgage business in 2011. The number of people who are remortgaging has risen by 28 per cent in the last year and mortgage intermediaries expect that number to rise further this year.

In a recent article in the Daily Telegraph it was reported that the quantity of remortgages this February rose by 5 per cent in compared to the previous month and 28 per cent year on year. The majority of remortgagers, opting for security first, chose fixed rate remortgages. These deals were popular with homeowners seeking to lock in to fixed rate deals, betting that rate rises in the future would make an investment now worthwhile.

With inflation reaching over 4 per cent in the UK, speculation is rife that the Bank of England is set to raise interest rates from their current level of 0.5 per cent in the near future. This is prompting increasing numbers of remortgages – there were 26,100 in February, just short of the 16 month high reached in November 2010.

Recent Bank of England figures showed that net mortgage lending at the start of 2011 was above the six month average whilst a British Bankers’ Association spokesman confirmed that more people were looking to fix their mortgage rate through a remortgage.

Many mortgage advisers feel that the base rate increases will cause for the remortgage market to boom even further in the latter part of this year. Most organisations within the Financial Services industry appear to believe that the way that inflation and interest rates are predicted to go will help the UK markets to recover much more quickly than they have been in the past few months.

The report also showed that forty per cent of all mortgage advisors were sure that lenders’ interest in offering remortgages had grown in the last two quarters, whilst slightly more, just 4 per cent, thought that the appetite for lending had remained the same. Just under two thirds of those interviewed who worked directly in remortgaging claimed that fixed-rate mortgages offered better value for clients, were more secure and were more popular with borrowers.

TMA boss Phil Whitehouse was cautiously optimistic and said: “Directly authorised intermediaries feel the remortgage market has shown signs of life in recent months and will continue to grow, thanks to a number of market influences.”

He added: “It has been predicted that interest rates could rise as soon as May and, if this is the case, it will have a big effect on the remortgage market and the levels of remortgage business being written by intermediaries.”

The view held by mortgage professionals in the UK has also been reinforced by recent data from a survey by the HSBC subsidiary First Direct. The online bank and remortgage lender found that four in ten homeowners considering a remortgage in the next twelve months would definitely go ahead if rises in interest rates made their monthly payments at least £100 more expensive.

On the other hand some borrowers who are comfortable on low standard variable rates are reluctant to remortgage immediately. Taking a fixed rate generally tends to result in a substantial increase in monthly mortgage repayments. So, whilst it may be a good way to save money in the long run, many home owners are reluctant to take on a greater degree of financial pain in the short run especially because of the difficult financial climate.

Timothy Frodsham writes for JustRemortgages.com one of the UK’s
top sites for the latest remortgage rates and best remortgage deals.

Article Source: http://www.earticlesonline.com/Article/The-Spectre-Of-Base-Rate-Rises-In-Late-2011-Is-Fueling-the-Upwards-Drive-Of-Remortgage-Levels/1178047