In response to rising interest rates, mortgage customers are increasingly opting for fixed rates and making lump-sum payments, a recent study by Butterfield Mortgages reveals.
The research, which stemmed from a survey of 2,000 UK adults—667 of whom are mortgage holders—indicates that over the past year, 27% of mortgage customers have made one or more early lump-sum repayments to trim their mortgage debt.
Notably, this figure leaps to 49% for borrowers on tracker or standard variable-rate mortgages. Since June 2022, one in four mortgage holders have re-mortgaged to lock in a fixed rate.
With the Bank of England raising the base rate from 0.1% to 5.0% since December 2021, and projections suggesting a peak of 5.75% later this year, the landscape for borrowers has undeniably shifted.
Reflecting this change, 20% of borrowers have either deferred or scrapped their home-buying plans due to the heightened rates. Conversely, 13% have downsized or relocated to more affordable properties to reduce their mortgage costs. Interestingly, 22% of current mortgage customers have sped up their home-buying ventures in anticipation of further rate hikes.
The study also highlighted that only 44% of the respondents believe that interest rates are nearing their zenith, with potential relief on the horizon. Furthermore, a significant 67% believe the mortgage market is still grappling with the repercussions of last September’s mini-Budget introduced by Liz Truss.
Alpa Bhakta, CEO of Butterfield Mortgages, said: “The past year has seen borrowers steering through a notably intricate mortgage scenario. Our findings underscore the proactive measures many are taking—whether it’s early repayments or hastening home purchases in the face of potential rate hikes.”
Bhakta emphasised the importance of being proactive in the current economic setting, adding that “For lenders and brokers, open dialogue with borrowers about prospective rate or product changes is crucial. This ensures they traverse the high-interest terrain with assurance.”
