Levels of remortgaging reached the highest level for eight years in February, while the average amount borrowed fell, according to new figures from conveyancing firm LMS.
According to the data, remortgage numbers increased to 43,967 in February, up 8% on January, a rise of 45% on the corresponding month last year and the highest level since January 2009.
But the average loan amount dropped by 5% to £154,138 in February, with a total of almost £6.8bn borrowed in remortgaging for the month, down from £7.1bn in January.
The upsurge in the number of remortgages is the combined result of low rates, down from 2.15% in December 2016 to 2.05% in January, and the will of remortgagors to lower their monthly repayments, with 20% managing to do so in February.
Despite the hike in the number of remortgages, affordability worsened with the repayment as a percentage of total income rising month-on-month from 16.9% to 17.8%, which will concern some homeowners who already face tightening purse strings as a result of rising inflation, which hit 2.3% in February.
Many of those who opted to remortgage did so because they anticipate that rates will soon increase.
Some 49% of those surveyed said that they expect a rate rise within the next year – the same percentage believe rates will remain the same. But this does follow months of speculation and false expectations of a rate rise, stretching back to the tail end of last year.
Andy Knee, chief executive of LMS, said: “February enjoyed the biggest boom in recent remortgaging history. Remortgage transactions rose to their highest level in eight years as homeowners took advantage of continued low rates and the opportunity to lower monthly repayments.
“However, February also fired a warning shot. Affordability worsened, more homeowners expect rates to rise and more are prepared to wait longer to remortgage again. Caution may well set in once again.
“Meanwhile, inflation has risen to 2.3% and real wages are starting to fall. The consequence: homeowners will have less in their pockets come the end of the month. Remortgaging can help alleviate a potentially difficult financial situation, for example, one-in-five reduced their monthly repayments by remortgaging in February.
“With the macroeconomic climate expected to be more precarious from March onwards, homeowners would be wise to take advantage of current conditions and remortgage now – before it’s too late.”