Possible rate rise sees surge for new mortgages

The figures come against a backdrop of a hawkish shift in rhetoric from the Bank of England

Worries over a looming interest rate rise have sent homeowners scurrying to remortgage while deals are cheap, the British Bankers’ Association has said.

Its latest figures showed 23,985 remortgaging deals in June, a 20 per cent rise on the same month last year.

Richard Woolhouse, the chief economist at the BBA, said the increase in the number of people remortgaging “could be down to savvy borrowers taking advantage of competitive deals on fixed-rate mortgages ahead of a possible rise in interest rates”.

He added that the overall market was “beginning to hot up again” as the number of loans for house purchase hit a higher-than-expected 44,488 over the month, well above the 39,340 average of the past six months.

The figures come against a backdrop of a hawkish shift in rhetoric from the Bank of England.

The Bank’s Governor, Mark Carney, last week flagged up that homeowners should expect a rate rise “around the turn of the year”, while David Miles, of the Monetary Policy Committee and a former dove among the rate-setters, has also shifted stance, saying interest rates should go up soon.

Minutes of the Bank’s July meeting revealed growing splits on the nine-strong committee, fuelling expectations that some members will vote for hikes in August.

Howard Archer, the chief UK economist at IHS Global Insight, said: “There is now a very real prospect that the Bank could act before the end of 2015.”

Mark Harris, at the mortgage broker SPF Private Clients, predicted there would be a surge in borrowers remortaging in coming months. He added that swap rates, which are used to price loans, have already been climbing, meaning that “the pricing of fixed-rate mortgages will inevitably rise”.