Yahoo Movies Santander sees rush to remortgage as home owners lock in deals ahead of interest rate rises
Santander is seeing bumper demand for remortgaging as homeowners lock in cheap deals ahead of looming interest rate rises.
Santander UK chief executive Nathan Bostock told the Standard demand for mortgages this month was the highest since May.
“What you’re seeing now is people remortgaging at historic lows,” he said. “They are looking to lock in.”
Santander has lent £5.2 billion in mortgages so far this year, a performance Bostock called “phenomenally strong”. Early demand was driven by people moving house due to pandemic-driven changes in the way we work.
But Santander, Britain’s third-biggest mortgage lender, is now seeing more demand for remortgaging. Demand for five-year fixed rate deals currently higher than demand for two-year fixed rates, which Bostock said was “unheard of”. Homeowners typically prefer the flexibility of two-year deals.
Homeowners are clamouring to remortgage as banks pull cheap deals from the market. Santander has joined the rest of the market in raising the cost of its mortgages as financial markets bet on at least one — and possibly two — interest rate rises before the end of the year. Market bets are pushing up the cost of hedging home lending deals.
“Prices are going up,” Bostock said.
The comments came as Santander UK reported a strong third quarter. Pre-tax profits rose 19% to £687 million. The bank was boosted by write-backs from pandemic-era provisions, mortgages, and cost savings from an ongoing transformation plan. The bank wrote back £100 million from loss provisions, taking total write-backs so far this year to £170 million.
Bostock called the quarter “very strong”, adding: “It’s obviously up there in terms of the best performances we’ve had.”
Despite the good momentum, Santander cautioned that there were clouds on the horizon. The bank said: “We anticipate the ongoing effects of Covid-19, supply chain disruption and dislocation in the labour market are likely to have an impact on the sustainability of the recovery, while inflationary pressures and the impact on interest rates are likely to have implications for bank earnings.”
Bostock said supply chains were “under enormous strain”, which was impacting business customers.
On interest rates, he said: “How fast things rise and by how much is important.” Bostock warned that the combination of higher rates and rising inflation could squeeze households and businesses. That could “translate into higher losses for banks”.
Santander said in April Bostock would move elsewhere in the bank by the end of the year. There is still no word on his replacement. He said the search was “progressing well” and said he would remain as CEO until it was complete.
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