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British consumers expecting another jump in the Bank of England’s interest rates are rushing to lock in fixed-rate mortgages, new data shows.

The proportion of customers searching for fixed-rate mortgages on data firm Experian’s comparison site arm rose to over 67.4 per cent in February, a jump from only 60.3 per cent in December.

The new hawkish tilt to the Bank of England has been a relatively recent development. Interest in fixed-rate mortgages had jumped in September, when only 58 per cent of potential borrowers searched for steady interest rates, after the Bank gave its first indications it would consider reversing its previous move, a post-Brexit-vote cut in August 2016.

The Bank of England’s determination to start raising the base rate at which it lends to banks has taken many economists by surprise, which resulted in a surge of interest in remortgaging from households faced with the first rate hiking cycle in over a decade.

Demand for fixing the rate, rather than plumping for a variable tariff which could rise if Bank of England lending rates do, jumped to 67.1 per cent in November after the first hike.

Separate data from UK Finance last week showed a spike in remortgaging activity as procrastinators rushed to get a better deal, with 7.4 per cent more remortgagers than the same month a year earlier.

The jump in interest in remortgaging has come against a backdrop of falling demand for mortgages from first-time buyers and home movers.

The Bank this month gave a strong signal that it expects to hike rates again in May, saying market expectations of a first hike only in November would not be sufficient to reduce inflation to target in three years’ time.

A May hike would raise bank rate, the Bank’s main interest rate to 0.75 per cent, its highest since February 2009 as the central bank fought the financial crisis. Economists then expect a second rate rise in November, before a period of stability as the UK prepares to leave the EU in March 2019.

Source: City A.M.

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