The number of homeowners who secured a new mortgage deal increased in March, according to UK lenders, as expectations of an interest rate hike gathered pace.
The total number of remortgages in March rose to 33,900, worth £4.1 billion, a 16% increase on February and a 17% rise on the same month last year, the Council of Mortgage Lenders (CML) said.
Pressure to raise interest rates mounted on the Bank of England in March, as official figures revealed a spike in the cost of living. The rate of inflation has since pulled back but at 4% is still double the Government target.
This meant demand for fixed rate mortgages intensified as homeowners who had been sitting on their lenders' standard variable rate looked to take out a new deal before the base rate rises.
Elsewhere, the CML said the number of new mortgages increased 24% month-on-month in March to 37,800, worth £5.4 billion, but this was still down 17% on a year earlier.
Remortgaging accounted for 37% of all lending in the first three months of the year, an increase from 30% in the final quarter of 2010.
Looking at the first quarter of 2011, house purchase lending was down 26% by volume and 27% by volume, compared with the last quarter of 2010.
CML director-general Michael Coogan said: "We saw a significant increase in both house purchase and remortgage lending in March but, over the first quarter of the year as a whole, the picture was subdued and that is unlikely to change for the foreseeable future."
Mr Coogan warned that bank holidays in May and those for Easter and the royal wedding were likely to hit lending activity in the second quarter, adding that one month's data may not reflect the overall trend.
He said: "It may take until publication of the second quarter's activity to get a full understanding of how the market has reacted to the squeeze on household incomes."
A total of 14,600 mortgages, worth £1.7 billion, were advanced to first-time buyers in March, an increase of 28% from February, but a fall of 17% from last year, CML said.
Howard Archer, chief European and UK economist at IHS Global Insight, said the figures did little to dilute suspicions that house prices will remain under downward pressure over the coming months.
He said: "We believe that tighter fiscal policy and the very real possibility of gradually rising interest rates before the end of 2011 will maintain pressure on housing market activity and prices over the coming months."Reuse content