Could 2018 be the year of the remortgage? With excellent mortgage deals currently on the market and many of the two-year deals agreed before the 2016 stamp duty changes now reaching maturity, there looks set to be a surge in remortgage activity.
Half a million mortgages are due to mature over the coming year, with many borrowers being switched from their current rates to their lender’s standard variable rate. But with house purchases down, competition between the lenders in the remortgage market is hotting up, which means there are some fantastic deals to be had. In fact, research shows that a typical borrower could save £600 a year by switching from their existing two-year fix to a new deal.
One million homeowner mortgages agreed in 2016
The expected spike in remortgage activity in 2018 is the result of the one million homebuyer mortgages agreed in 2016. That represents the highest number since 2008. Around 95 percent of those mortgages were fixed-rate deals, with slightly more than half of those deals likely to be the most popular two-year fix.
That means more than 500,000 loans are due to expire this year. A much smaller number of five-year fixed deals that were agreed in 2013 will also expire, adding to the number of borrowers searching for a new loan.
A surge in the buy-to-let remortgage market
There will also be an inevitable increase in the buy-to-let remortgage market resulting from the rush to beat the introduction of the stamp duty surcharge on second homes introduced in April 2016.
Thousands of existing and prospective landlords pushed through deals before the three percent stamp duty surcharge came into force. This was particularly the case in London, where there was a 35 percent increase in exchange activity. There was also a similar surge in buy-to-let activity in the East of England, although not to the same extent. Many of these deals will soon be expiring, further fuelling remortgage activity in the year ahead.
Borrowers will make savings
The good news for those borrowers who are looking for a new deal in 2018 is that there are still plenty of attractive home loans on offer. Increasing market competition alongside rising house prices means that many borrowers could save money by remortgaging, even when compared to the rates they received on their original two-year deal.
Further increases in the Bank of England base rate may worry some homeowners, but even if the base rate were to rise by a further 0.25 percent by the end of the year, that would not necessarily translate into more expensive mortgages. However, borrowers with current deals that track the BoE base could find a further rise in interest rates hits them hard.
An increase in product transfers
One area of the market that is expected to become more competitive in 2018 is the product transfer, which allows borrowers to simply switch to another deal with their existing lender. With house sales falling across much of the UK (including East Anglia, where sales have fallen by 30 percent since 2006), many lenders will work harder to keep hold of their existing customers.
That could be an attractive proposition for many borrowers, with no additional paperwork required and the convenience potentially proving more attractive than finding a marginally better rate elsewhere.