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Low rates boosts remortgage market activity in the UK

There was a surge in remortgage activity in 2016, which peaked in Q4, as more borrowers opted for longer term fixed rates, the latest Financial Advisors Confidence Tracking Index from Paragon shows.

The latest research, based on interviews with 201 mortgage intermediaries, reveals that 39% of all mortgages handled by advisers in the final quarter of last year were remortgages – an increase of 7% on Q1.

That figure is also a 4% increase on the corresponding period in 2015.

The rise in remortgage activity echoes industry data published by the Council of Mortgage Lenders (CML), who last month reported that there were 34,700 loans for remortgage in December worth £5.8bn, representing year-on-year increases of 13% in volume and 14% in value.

Next time buyers are now the second most common type of borrower having overtaken buy-to-let lending accounting for 23% of mortgages handled.

In terms of interest rate type, there is a clear preference among borrowers for fixed rate mortgages, which accounted for 83% of all cases in Q4 2016 and has increased year-on-year since 2010. Tracker mortgages remain second at 14% of all cases, representing little change over the course of 2016.

Initial fixed or tracker periods of two years are still the most popular products, making up 53% of all cases in Q4 2016 – an increase of 5% on the same quarter in 2015.

John Heron, managing director, Paragon Mortgages, said: “Our survey data shows increased levels of activity over 2016 driven particularly by borrowers remortgaging to better rates. These are as likely to be longer term fixes as they are short term deals which bodes well for customer resilience in an uncertain market.

“Buy-to-let had a very strong start to the year with customers looking to beat the stamp duty deadline. There was an inevitable decline in lending in Q2 but volumes have slowly improved as landlords have developed their strategies to mitigate higher taxes on rental income.”

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