Expect mortgagors to make hay while the spring sun shines

News that the Bank of England voted to hold interest rates for the third month in a row on Maundy Thursday must have been welcomed by the nation's homeowners, some of whom have felt compelled in recent months to remortgage to better deals in an attempt to stave off the worst effects of increased borrowing costs.

Of course, every time the Bank holds rates, it only makes the day when they actually go up seem more inevitable. But for now, let's be thankful that our economic policy-makers in the capital decided to wish us a cheap and stress-free Easter.

However, while all is quiet on the interest rates front (which may not last long), banks and other mortgage providers now have to find another way of encouraging people to remortgage to a cheaper deal.

In fact, only last week, mortgage provider Northern Rock said it expects profits to grow as people attempt to consolidate unsecured debts by using the money tied up in their property. Chief executive Adam Applegarth, who was understandably upbeat, said that remortgaging now represents nearly half of the mortgage market – a direct result of people trying to tackle their credit card bills and other debts.

So it should come as no surprise that lenders are using the optimism that comes with spring to launch a new batch of mortgaging products.

Indeed, I noticed the other day that RBS has launched a new fixed-rate for buyers and homeowners hoping to remortgage, while Pink Home Loans has launched an "exclusive" fees-free remortgage deal from Intelligent Finance. At the same time, Britannia Building Society has said that remortgaging customers can switch to one of its fixed-rate deals either for free or for a "very competitive rate".

No doubt a host of other lenders and banks have introduced – or are about to roll-out – new and improved remortgaging rates to persuade people to consolidate their debts or to pay for a loft conversion.

I suppose as it is the Easter season, some homeowners have already decided to splash out on their home and have raised the money to do so by remortgaging. I can imagine there were quite a few households who started ambitious DIY projects over the Easter weekend – maybe a conservatory or a newly landscaped garden in time for the summer sun.

Having said this, a report by Woolwich at the start of April revealed that the Great British public is getting a bit sick of DIY and all those home makeover programmes that dominate the TV schedules in the evenings. In fact, the study showed that most homeowners would rather pay a professional to undertake tasks such as painting and decorating, building an extension and installing a new kitchen or bathroom.

The same piece of research also said that households are increasingly looking to use their mortgages to fund improvements to their homes. In fact, Woolwich used the opportunity to tell the world that it is able to reduce customers' outgoings on a monthly basis by remortgaging.

So, until the Bank of England decides to make life a bit more expensive for already-stretched homeowners, it is likely that lenders will debut some interesting marketing strategies to encourage people to remortgage. And if the summer this year is as hot as the Met Office predicts, then expect lenders to make the connection between global warming and raising enough capital to pay for next-generation wind turbines and solar panels.

Author: Richard Mather