Of course for the purpose of this article we’re taking a look back at the remortgage market in Q4 2014, including data from months prior to this, which almost makes me feel like I need to head out Christmas shopping again and order the turkey. Let me clarify I did say almost.
In my last article I suggested that fixed rate ‘wars’ will continue to heat up and that there may be a slight rise in remortgage activity. This wasn’t too far off the mark especially in terms of the raft of product activity which has seen even more attractive rates topping various best buy charts. In terms of remortgage activity and volume this is a difficult one to call across the market, especially when you take the Christmas period into account. From our perspective, here at Barclays, volumes and activity were just about where we expected them to be and without going into too much detail I suspect they would probably be above average when compared to whole of market figures.
Focusing on statistics from the Council of Mortgage Lenders, back in October the trade body suggested that remortgage lending activity saw a decline month-on-month, with the number of remortgage loans totalling 26,600. This signified a fall of 6 per cent down on September figures and an 11 per cent drop when compared to October last year. The value of these loans (£4.1 billion) was also down 7 per cent on the previous month and down 5 per cent in relation to October 2013 statistics.
The latest data for November 2014 saw a continued decline with number of remortgage loans totalling 24,000. This was 8 per cent down on October and 16 per cent down on November last year. The value of these loans (£3.6 billion) was also reported to slumped 10 per cent on the previous month and 14 per cent compared to November last year.
Other stats for September, from the latest LMS remortgage report, showed that remortgage loans were now said to account for 25 per cent of the total market, down from 29 per cent at the same point last year. Additional figures included in the report highlighted that borrowers in September were remortgaging every four years and nine months, unchanged from August statistics but down from four years and four months as detailed in September 2013. These figures were substantially lower than the pre-crisis peak – in August 2008 - when borrowers were remortgaging on average every three years and one month.
On a positive note however, research from Connells Survey and Valuation outlined a resurgence in remortgaging activity in November as the rest of the UK housing market appeared to cool. It underlined that remortgaging was the most robust sector of the housing market, performing well both on a monthly and annual basis, while gross mortgage lending fell 9 per cent from October to November and was steady year-on-year.
In terms of figures the research suggested that the total number of remortgaging valuations conducted in November increased by 10 per cent when compared to October figures, and by 3 per cent compared to November last year. So the question is - does this represent the turning point for the remortgage sector? In truth it’s difficult to say.
What is fair to say is that MMR ramifications continued to have some lingering affect on lending conditions leading up to and into Q4. On the other hand ‘rate wars’ burned stronger than ever and interest rate speculation continued, factors which should have been instrumental in generating even more remortgage demand. But still the activity and volume within the sector didn’t truly reflect such favourable conditions. The question is why?
In Q4 2014, in partnership with the Centre of Economic Business Research (Cebr), Barclays Mortgages produced some research which goes some way towards answering this particular question. Results showed that almost half (46 per cent) of respondent weren’t able to correctly recall the UK’s current base interest rate and only 12 per cent were aware of a recent Bank of England announcement forecasting mortgage rates will rise in October 2015. In addition just under half (49.5 per cent) of those with a variable rate mortgage don’t expect or aren’t sure that their mortgage repayments will rise in 2015, despite the Cebr predicting that homeowners across the UK could face a potential £1.1 billion total increase in mortgage repayments by the end of 2015.
The survey also found that almost half (45 per cent) of UK homeowners felt they may have missed out on better mortgage rates and therefore paid out more because they weren’t sure whether or not to fix or change their mortgage.
It’s clear from these figures that there continues to be widespread confusion over interest rates. Looking forward, while a new year often brings with it some renewed financial focus; it will be interesting to see if this is reflected in any Q1 remortgage market uplift. And if greater numbers of proactive intermediaries can find new ways of tapping into this potential to begin 2015 with a remortgaging bang.
