A report shows that 46% of borrowers opted for two-year fixed rate products, compared with 41% who chose five-year fixes

Borrowers leaned towards short-term deals in July as the remortgage market saw a sharp increase in completions, according to the latest LMS Monthly Remortgage Snapshot.

The report shows that 46% of borrowers opted for two-year fixed rate products, compared with 41% who chose five-year fixes. Just 4% selected a three-year fix and 2% took a 10-year product.

Completions rose 71% month-on-month, while pipeline cases dropped 9% and instructions declined 4%, pointing to a rush of borrowers finalising deals before their current homeloan expires. The cancellation rate rose 1%.

The data also highlights the continued strain on household finances. Borrowers who remortgaged in July faced an average monthly repayment rise of £329.54, with more than half (56%) seeing their monthly outgoings increase. By contrast, nearly a third (33%) managed to lower their repayments, with an average monthly saving of £207.63.

At the same time, many borrowers appear to be using remortgaging as an opportunity to release equity. Nearly half (43%) increased their loan size in July, borrowing on average an additional £20,848.

This figure is almost double the average amount by which those reducing their debt cut back (£12,739). A further 30% reported no change in their loan size, underlining the varied strategies homeowners are taking as they adjust to higher rates.

The snapshot also highlights a split in expectations over the direction of interest rates. Around half (44%) of borrowers expect base rates to increase within the next 12 months, while 19% believe an increase is further away and more than a third (37%) do not expect any increase at all.

LMS chief executive Nick Chadbourne said: Most borrowers have favoured short-term certainty, with two-year fixed-rate products becoming the most popular choice. While monthly repayments increased for many, the desire to manage costs and secure financial stability remained a key driver. Further spikes are likely to occur around quarter-end, when more fixed-rate products expire.