Overall mortgage activity rose almost a quarter (24.6%) in Q1, but it was a rush to remortgage that drove the majority of the activity, with remortgaging rising 45.8%, according to the newly-launched Stonebridge Mortgage Market Index.
The surge in volume of remortgage applications came as borrowers continued to exit ultra-low mortgage products secured during the pandemic. For example, five years ago in March 2021, effective interest rates on new mortgage borrowing fell to just 1.85%,according to Stonebridge.
Mortgage applications for purchase fall
The data aligns with The Bank of England’s Credit Conditions Survey for Q4, which had predicted in January that remortgaging activity would increase in the first quarter while secured lending activity for house purchase would fall.
Stonebridge’s data shows that mortgage applications for purchase fell 3.6% annually in the first quarter. Meanwhile, the share of variable-rate mortgages climbed 0.8ppts from 4.7% to 5.5% YoY, with fixed-rate deals accounting for 94.5% of the market.
Two-year mortgages have increased in popularity with their share of all home loans rising from 51.6% to 65.2%, while the share of five-year deals fell from 39.4% to 29%.
Borrowing costs fell annually, despite the impact of rising swap rates due to the Iran conflict in March. The average interest rate dropped 0.43ppts YoY from 4.74% to 4.31%. LTVs remained relatively stable, falling just 1ppt to 61%.
Recent reductions in interest rates and other affordability changes had fuelled consumer confidence and increased their ability to borrow. Loan amounts had risen 4% as a result and 7.3% for remortgages, despite property valuations only rising by 2.3%.
With a further 1.8 million fixed-rate mortgage deals expected to expire this year, according to UK Finance, it’s expected that remortgaging activity will remain strong for 2026.
Huge demand for advice
Rob Clifford, chief executive at Stonebridge, said: “We know many borrowers locked into attractive five-year rates during the pandemic. Now that so many of those consumers are reaching the end of the deals they grabbed at that time, we are naturally seeing huge demand for advice on refinancing options.
“That will continue throughout this year, with plenty of lenders dynamically pricing both product transfers and remortgage deals to win market share.
“We’re likely to see a reversal in rate volatility in the second half of the year and the popularity of variable or tracker rates might increase. If the energy crisis is short-lived, a variable product would allow borrowers to capitalise on a falling base rate once the conflict subsides, but this is a time when impartial and expert mortgage advice is worth its weight in gold.”
