‘Tactical’ mortgage move to ‘cheaper products’ saving borrowers cash | Personal Finance | Finance

Mortgage approvals climbed marginally in March while remortgage volumes soared, fresh figures from the Bank of England reveal, with one broker suggesting borrowers are “falling over themselves to secure rates as far in advance as possible”.

Another broker stated borrowers are growing more “tactical”, opting for cheaper tracker products, frequently for the first time, instead of locking in at elevated rates. Net mortgage approvals for house purchases, an indicator of future borrowing, rose to 63,500 in March, up from 62,700 in February, exceeding an average of approximately 63,200 over the preceding six months, the Bank of England reported.

Approvals for remortgaging, which solely capture remortgaging with a different lender, jumped to 51,300 in March, up from 41,200 in February. Net borrowing of mortgage debt by individuals climbed to £6.2 billion in March, up from £5.2 billion in February, surpassing the preceding 6-month average of £4.9 billion.

Meanwhile, net borrowing of consumer credit by individuals in March dipped marginally to £1.9 billion, down from £2.0 billion in February, narrowly exceeding the preceding 6-month average of £1.8 billion. Within this, net borrowing via credit cards held steady compared to February, at £0.7 billion in March. Net borrowing through alternative forms of consumer credit, including car dealership finance and personal loans, stood at £1.2 billion in March, down from £1.3 billion in February.

Reflecting on the surge in remortgage figures, Adam Stiles, managing director at London-based Helix Financial Partners, noted that people had seldom been as proactive on that front.

He said: “People who have mortgages coming to the end of their current deal have been falling over themselves to secure rates as far in advance as possible to stop their follow-on rate going up any further, with the hope rates drop between now and when their current deal ends.”

When it comes to new purchases, however, Stiles noted that activity remained subdued: “Swathes of would-be borrowers are not buying houses right now. The general consensus we are seeing is that if you don’t need to do anything, you won’t. People have been hugely put off by the sharp and rapid rate rises and are instead opting to wait and see.”

Harry Goodliffe, director at Winchester-based HTG Mortgages, remarked that while “mortgage demand is hanging on, confidence is very much lacking”.

He went on to add: “Since the war started in Iran, demand hasn’t fallen off a cliff but people are clearly more hesitant and waiting to see where rates end up.

“Borrowers are getting more tactical, with some leaning toward trackers for the first time as a short-term bet, or exploring the lowest possible fixed term rather than locking in, hoping things settle.

“Falling rates have helped over the past week, but the stop-start pricing is what’s really spooking people. The market currently feels very much stuck in limbo, not crashing but not properly recovering either. Both markets and consumers will be nervous until more certainty returns.”

Nouran Moustafa, practice principal at Roxton Wealth, also noted that “remortgage clients are reviewing earlier”, and concurred that caution was prevalent in the market. “Borrowers are not rushing in blindly but stress-testing decisions harder”, she said.

Much like fellow brokers, Moustafa confirmed that appetite for tracker mortgages was on the rise: “I am seeing more curiosity around trackers, but not quite a stampede. Some clients like the cheaper starting rate and the option to switch later, but others still want the certainty of a fix because household budgets are already stretched.

“Recent rate reductions have helped sentiment, but they have not magically solved affordability. They have brought people back to the table, not made them reckless.”

Jamie Alexander, mortgage director at Romsey-based Alexander Southwell Mortgages, revealed that the past two months have seen considerable volatility on the demand front: “Demand since the war started has been hard to read. Some weeks the phone doesn’t stop, others it goes quiet. People are clearly watching and waiting to see how this all settles.

“The big trend I’m noticing is clients gravitating towards trackers. Many feel almost obliged to fix, but with rates where they are and markets still pricing in further reductions, plenty are choosing to stay flexible and keep their options open.

“With the base rate held at 3.75%, that logic isn’t unreasonable. Overall I’m cautiously optimistic. The direction of travel on rates is still downward, even if the Iran situation has complicated the timeline.”