Majority of mortgages taken in 2021 five-year fixes: LMS

More than half – 52% – of mortgages in 2021 were on a five-year solution, LMS’ annual mortgage report shows.

Meanwhile, 37% of mortgages taken out were of the two-year type and only 2% at a 10-year fixed rate.

Overall, mortgage activity increased in 2021, “with a steady increase in instruction and completion volumes following the announcement of the stamp duty holiday extension in March,” the chief executive said. from LMS, Nick Chadbourne.

An equal proportion of borrowers – 44% – increased their monthly mortgage payments (by an average of £257) as did the number who reduced their payments, by an average of £225.

And 49% of mortgage borrowers increased their total loan amount, only 18% reduced their total loan amount, while 32% saw no change in their loan.

Chadbourne says: “Loan sizes have been affected by a range of factors through to 2021. At the start of the year, we saw an increase in borrowers looking to increase their loan size, with confidence being boosted by the economic recovery and better than expected unemployment rates.

He adds that at the end of the year, optimism returned, “as consumer confidence waned due to rising inflation and rising interest rates.”

Chadbourne believes rates will continue to rise in 2022.

The most popular reason to remortgage was to free up equity, with 28% of borrowers choosing to do so, with 27% seeking to lower monthly payments.

And 21% of borrowers did so to secure a fixed rate in an increasingly unpredictable economic environment.

The LMS report adds that the remortgage pipeline peaked in the last quarter of 2021 and, as Chadbourne puts it, “In 2022, we will see the first effects of two major product buying events.

“Two-year patches taken out when the real estate market reopens in 2020 will begin to expire, along with five-year patches, which were phased out in 2017, when 50% of all products were of this type.

“This healthy business pipeline faces a further base rate increase, the ongoing energy crisis and the post-furlough labor market. All of this will play a part in how the business evolves.

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