Millions of mortgage payers could face more expensive repayments if rate setters follow through on hints from the Bank of England to raise the base rate from 0.25 per cent this Thursday.
Many are not taking the risk and 47,598 re-mortgages were offered to owners in September – a sharp rise on the 46,270 recorded the month before and the highest number this year, according to the Bank’s latest Money and Credit report.
The increase comes as economists predict a potential interest rate jump after a meeting of the Bank’s Monetary Policy Committee later this week.
The Bank of England’s base rate has been at a record low of 0.25 per cent since March 2009 and has not been increased since 2007.
Jonathan Harris, of mortgage broker Anderson Harris, said: “Cheap mortgage rates have helped focus borrowers’ minds, particularly as there have been strong hints that interest rates may rise this week.
“Mortgage rates have already started edging up on the back of higher funding costs but lenders are still competitive and keen to lend so it is not too late for those looking for a cheap fixed rate.
“The remortgaging market should continue to thrive this autumn.”
Nick Chadbourne of property legal services group LMS, said: “The remortgage market boomed in September as the persistence of low interest rates this year has changed remortgaging behaviour.
“More homeowners are opting to fix onto long-term deals on the lowest-ever interest rates, because many realised they will not see the cost of borrowing this low again – especially with a potential rate rise looming.”
Britain’s biggest building society the Nationwide was the first lender to announce a pre-hike move to cut its own interest rate in a bid to win market share from re-mortgagers.
“As mortgage customers look to secure competitive rates in the light of the uncertainty around Bank Rate, the Society is cutting rates for both house purchases and remortgages,” a spokesperson said.
Fixed rates will be reduced by up to 0.50 per cent, now starting at 1.29 per cent.
Last month Mark Carney, the governor of the Bank of England said he expected rates to increase “in the relatively near term”.
Since then, new economic figures have made a rise more likely.
The UK economy had higher than expected growth in the three months to September, with gross domestic product rising 0.4 per cent.
While increasing borrowing costs could hurt squeezed households, it will support the strength of the pound and help to cut inflation, which reached three per cent in September and is expected to rise further still, driven by the higher cost of importing food and fuel.
Jonathan Sealey of Hope Capital warned that borrowers would have to look at their finances ahead of the interest rate expected rise.
“Moving into the last couple of months of the year the threat of rising rates, in a world when most people have less in their pockets, could be the impetus that borrowers need to look at their current situation to try to reduce their monthly outgoings,” he said.
Meanwhile mortgage approvals fell to a three month low with 66,232 loans for house purchase given the green light in September – down for the second month in a row from 67,232 in August.
The Bank’s report also showed that annual growth in consumer credit eased to 9.9 per cent in September, matching levels seen in July.
The amount borrowed for the month reached £1.6bn, down from £1.8bn in August.