Wealthy homeowners scramble to remortgage to defend against interest rate rise

Applications rise by 21pc in July as households look for deals ahead of expected increase in repayments

Some existing borrowers are being forced to pay higher rates
The average price of a house being remortgaged rose 18pc Credit: Photo: Alamy

Homeowners are scrambling to remortgage their properties to prepare for interest rates coming off the rock-bottom levels that have kept borrowing costs low in recent years.

Remortgage applications rose by 21pc in July, the most for six months and the first time this year that growth in remortgages has outpaced purchases, according to figures compiled from 550 brokers and 900 estate agents by the Mortgage Advice Bureau (MAB).

“A likely raise in interest rates will prompt many homeowners to reconsider their options and lock into preferential rates before a base rate rise takes hold,” said the MAB’s Brian Murphy, who pointed to improving property prices allowing homeowners to seek preferential deals.

The Bank of England raising interest rates has become a much closer proposition in recent months as the economy rapidly improves and unemployment falls, although weak wage growth and below-target inflation have reduced pressure on Mark Carney, the Bank’s Governor, for an imminent increase.

However, mortgage rates have crept up since the start of the year, leading wealthier homeowners to look for deals before they rise significantly.

Remortages were behind a significant proportion of activity in July. The 21pc rise in applications compared to 1pc in the previous two months and a 12pc drop in April. Purchase applications, meanwhile, fell 4pc in the same month.

The data showed that wealthier homeowners are increasingly tapping the market. The average salary of remortgagers was £46,900, up 7pc a year ago, while the average house price being remortgaged was up 18pc to £310,646, far faster than the 10.2pc rise in the average house price recorded by the Office for National Statistics in the year to June.