The number of homeowners and landlords securing new mortgage deals surged in June to the highest level since the aftermath of Liz Truss’s ill-fated mini-budget in October 2022, as falling interest rates encouraged borrowers to refinance.
Figures published by the Bank of England on Tuesday showed that 41,800 people remortgaged with a new lender last month, up slightly from May and the most since the financial turmoil triggered by Truss’s short-lived premiership.
The uptick in remortgaging comes after a series of interest rate cuts by the Bank of England, which has lowered the base rate to 4.25 per cent, down from a peak of 5.25 per cent. In anticipation of further rate cuts, lenders have begun offering more competitive deals, prompting a wave of refinancing among homeowners.
However, the reprieve is not universal. Many borrowers are still on fixed-rate deals taken out during a decade of ultra-low interest rates following the 2008 financial crisis. As these expire, they face a sharp rise in monthly payments. The Bank estimates that 3.6 million borrowers—or 41 per cent of all mortgage holders—will refinance at higher rates over the next three years.
While 28 per cent of these borrowers could actually see lower payments thanks to recent base rate cuts, the rest will likely face steeper monthly costs.
“Existing homeowners emerging from cheap fixed-rate deals secured when interest rates were at rock-bottom are likely to be bracing for higher repayment costs when they eventually refinance,” said Alice Haine, a personal finance analyst at Bestinvest.
The Monetary Policy Committee is expected to reduce the base rate again next week, likely cutting it by a quarter of a percentage point to 4 per cent, which has already exerted downward pressure on new mortgage rates as lenders pre-empt the move.
The effective interest rate on new mortgages fell for the fourth consecutive month, dropping to 4.34 per cent in June from 4.47 per cent in May. This contributed to a rise in new mortgage approvals to 64,200, up from 63,300 the previous month and ahead of analysts’ expectations. Meanwhile, net mortgage lending more than doubled to £5.3 billion, significantly surpassing forecasts.
The data reinforces signs that the housing market is recovering from the slowdown following the end of the stamp duty exemption for first-time buyers in April. Ashley Webb, UK economist at Capital Economics, said that if current momentum continues, house price growth could accelerate to 4 per cent by year-end, up from the current annual pace of 2.1 per cent.
In a separate release, the Bank of England reported that household savings surged in June, with £7.8 billion deposited—the highest monthly increase since January. This was up from £4.3 billion in May and reflects growing caution among consumers amid recent signs of weakening in the labour market.
Recent figures from the Office for National Statistics suggest that businesses are cutting staff and slowing hiring, which may be fuelling greater saving as workers grow anxious about job security.
Despite these concerns, households borrowed more in June, spending £700 million on credit cards and taking out £1.4 billion in overall consumer credit, up from £900 million in May.
Thomas Pugh, economist at RSM, said the jump in consumer borrowing and remortgaging activity could point to a modest economic rebound in June, following GDP contractions in both April and May.
With interest rates expected to fall further and demand for property returning, the second half of the year may bring renewed strength to the housing market—but for many households, the end of cheap mortgages is only just beginning.
