The UK has seen a substantial year on year increase in the demand for five year fixed rate remortgages, now making up 42% of the overall lending market.
The latest report from conveyancing service provider LMS also shows that May saw a 5% increase in the proportion of borrowers remortgaging due to divorce or separation from a partner.
These figures include borrowers who are seeking to raise funds to cover divorce settlements, as well as those refinancing to buy out an ex-partner from their share of the mortgage.
The data also shows that the proportion of homeowners remortgaging due to divorce has increased from the 3% recorded in May 2017, and has also risen from the 2% of the market recorded in April this year.
There has also been an increase in the proportion of borrowers remortgaging to pay off debt, climbing from 13% in April, to 16% in May.
However, the most common reason for borrowers seeking to remortgage is that they are nearing the end of a fixed rate, accounting for 63% of those surveyed. May also saw 26% of borrowers remortgage to fund home improvements.
‘While most borrowers remortgage to switch deals or save money, we have seen an increase in remortgaging for different reasons this month, including homeowners remortgaging due to divorce or to pay off debts,’ said Nick Chadbourne, chief executive of LMS.
‘As divorce becomes simpler through innovations such as the Government’s new online divorce system, so too is remortgaging. This may well be contributing to the use of remortgaging as a vehicle to raise fund for divorce settlements,’ he explained.
‘In almost all cases customers are looking for an efficient process that delivers against both speed and value. A fees assisted remortgage is the most appropriate vehicle, developed and refined for this process, it offers both customers and lenders great value and an efficient legal platform to make the switch,’ he added.
Five year fixed rate mortgages remain the most popular product for those looking to refinance, with 42% of borrowers choosing these deals in May, an increase of 8% on the same month in 2017. However, the five year fixes have decreased in popularity since April, when 47% of the market opted for deals of this nature.
‘Demand for five year fixed rate remortgages remains historically high as borrowers look to protect themselves from a potential base rate increase later in the year. While the popularity of five year deals has dipped slightly month on month, they continue to dominate the market as borrowers lock in current rates for the long term,’ Chadbourne explained.
‘Lenders are operating in a competitive landscape, given the volume of different five-year fixed rate products available. Borrowers may wish to consult a broker to ensure they get the best deal to suit individual requirements,’ he pointed out.
Equity released through remortgaging is now at its highest level in ten months, as the gap widens between the average remortgage advance and the average redemption value of the original mortgage. The average amount of equity released through remortgaging has increased from £14,600 in April to £22,600 in May.
The increase is said to be mainly due to a decline in the average redemption value, which has dropped to £143,000 in May, down from £162,000 in the previous month.
‘The increase in the gap between mortgage advances and redemptions illustrates more borrowers are remortgaging to increase the size of their loans compared to previous months,’ Chadbourne added.