Stampede to remortgage before rates rise further

interactive investor comments on the latest BOE Money & Credit report.

• Approvals for remortgaging (which only capture remortgaging with a different lender) rose to 48,200 in February, according to the latest BoE Money & Credit report.
• This remains below the 12-month pre-pandemic average up to February 2020 of 49,500, but is the highest since February 2020 (52,100).
• The effective interest rate paid on individuals’ new time deposits with banks and building societies rose by 10 basis points to 0.77%.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Approvals for remortgaging rose to the highest level in February since before the pandemic as homeowners rushed to remortgage and lock into a fixed rate deal before rates inevitably rise further. The BoE data only captures remortgaging with a different lender, so the reality might be that there was a stampede of homeowners who remortgaged last month.

“While many mortgage provider wasted little time in announcing hikes to home loans, mortgage interest rates still remain super low by historical standards. We are likely to continue to see more borrowers looking to lock into competitive deals and do so fast before they go.  With the cost of so many other things on the up, opting for fixed rate deals offers payment certainty as well as protection against rising interest rates, which could create valuable breathing room in household budgets.”

Savings

“The reprieve in time deposit saving rates, rising by 0.1% to 0.77% (on average) in February, is modest to say the least and is instantly nullified by rising inflation. However, it is a step in the right direction for savings rates which have been stubborn slow to rise with the increases to the base rate.

“While saving rates are nothing to shout about, it is important to maintain an ample cash pot for emergencies now and in the future - three months’ salary is a good rule of thumb.”