February saw an increase in mortgage instructions and a decrease in remortgages, according to the latest update from LMS.
Instructions rose by 9% during the month, with borrowers seeking to lock in rates before they rise.
The majority of borrowers continued to choose 5-year fixed rate products, with 54% opting for this type of mortgage.
Meanwhile, 30% of those who remortgaged said their main aim was to gain longer-term security.
The pipeline contracted by 2%, however, and there was an increase in cancellation rates, leading to an overall cancellation rate increase of 0.35%.
Borrowers who remortgaged saw an average monthly payment increase of £257 and 70% increased their loan size.
Nick Chadbourne, CEO at LMS, said: “Instructions continued to rise in February as expected as people looked to lock in rates before they rise again – this is to be expected since we have seen swap rates bottom out, and the majority of borrowers continued to go after 5-year fixed rates in a push for longer term security.
“Despite this, the pipeline contracted as a result of a simultaneous increase in cancellation rates – this was predictable, though, as people who secured rates in December started cancelling and reapplying for more attractive rates. Heading into March, we are likely to see an uplift in instructions thanks to the ERC spike expected at the end of the quarter.
“This will be tempered a little as affordability remains a challenge, and with the Spring Budget doing nothing to help the housing market this will be unlikely to go away anytime soon. What we needed was measures to help people get on the property ladder, with the Government taking steps to increase housing stock and therefore improve affordability, and to make the long-term rental market more stable by easing punitive measures on landlords, but we didn’t see any of that.
“Hopefully there will be more input in the coming months, but until then we are likely seeing reduced activity overall as people effectively wait and see before making any decisions.”
