Remortgage market 'could do better'

At the start of any quarterly review piece, both for my clarity of thought and to ensure the reader that I’m not going completely mad, I feel like I need to spell out that whilst this is essentially a Q1 2015 review of the remortgage market that it will still comprise of some elements pertaining to 2014, I’m glad that’s clear!

Related topics:  Special Features
Andy Gray | Barclays
20th April 2015
Andy Gray Barclays

In my last article I speculated that entering a New Year could, and possibly should, bring a renewed financial focus for many people, especially in terms of their mortgage requirements. Looking at general activity levels within the intermediary market this certainly appears to be the case but when it comes to the remortgage market - on a school report at least – it might well still maintain the somewhat disappointing air of ‘could do better’.

Starting with some final Q4 2014 figures, data from the Council of Mortgage Lenders showed that the continued slump in remortgage activity led to a 13% decline in the number of loans in Q4 compared with the same period a year earlier. A total of 73,100 remortgage loans were reported to have been advanced, down from 84,000 in the same period a year earlier. The value of remortgages in Q4 2014 was also said to have dropped 4% year-on-year from £12.3bn to £11.1bn.

Although not the most positive news on which to enter into a new year, these figures still served to underline the huge potential of the market, especially when considering the raft of hugely competitive rates still on offer. However, they also outlined some of the lingering issues surrounding the remortgage market, especially in terms of the large numbers of homeowners still being either unaware of the great deals on offer or sitting on the sidelines waiting for rates to get even better. In addition seasonal factors need to be taken into account when analysing these figures and as we move into 2015 there are other factors, such as the General Election, on the horizon which may impact lending activity if there is any rising market uncertainty.

Having said all this, following this period of somewhat sluggish activity, the remortgage market was suggested to have experienced a long-awaited boost in January. CML data outlined that unlike home-owner house purchase; remortgage lending increased in January when compared to December 25,600 loans were advanced - up 15% on December but 12% down on January 2014. The value of these loans (£4.1 billion) also increased month-on-month by 21% but was down 5% year-on-year compared to January 2014.

This positivity was further backed by figures from the Mortgage Advice Bureau’s National Mortgage Index which showed remortgage applications to be up 24% in January and 17% year-on-year. Around the same time as these figures were released additional research from LMS showed that almost two-thirds (62%) of remortgage customers in January remortgaged to take advantage of the new lower mortgage rates on offer. It surveyed customers opting to remortgage at the start of the year and found that almost one in five (19%) homeowners increased the size of their loan by more than £10,000 to free up capital to pay off other debts or spend elsewhere. More than four-fifths (81%) took advantage of the opportunity to switch lenders, while just 2% were incentivised by their existing lender to stay with them, a fall of 2% since the previous month. Another encouraging sign was that almost half (46%) were reported to have consulted with an independent mortgage adviser or broker - a marked improvement since December when only 37% did this – to highlight the value that advisers and brokers have in sourcing the best rates available to customers.

This rise in activity, combined with continued favourable market and general economic conditions saw numerous lenders, Barclays included, make improvements to their remortgage offerings across most LTV levels and terms to ensure rates remained highly competitive across the board. However, this encouraging start to the year saw a slight blip when reviewing the ‘hot off the press’ lending figures just released by the CML. These illustrated that remortgage lending decreased month-on-month in February with 21,500 loans advanced - down 16% on January and 14% down on February 2014. The value of these loans (£3.3 billion) also decreased month-on-month by 20% and were said to be down 11% year-on-year compared to February 2014.

February’s figures are particular disappointing and could be reflective of some uncertainty surrounding pension freedoms and the upcoming election but this is certainly no excuse not to keep pushing down hard on the remortgage accelerator. In short - January, February and March have all seen short, medium and longer term fixed rates fall to some record low levels, yet all too few homeowners are taking advantage of these attractive deals. It remains a market which is being stimulated by lending competition but still requires a greater level of intermediary support and proactive initiatives to really ensure that clients get access and advice on deals that are unlikely to be bettered or repeated in the future.

Large numbers of homeowners could effectively reduce monthly outgoings by having a simple conversation with a mortgage intermediary but for many this remains a hassle rather an opportunity. Let’s hope that my next review will see the remortgage market spring back to a place where it really deserves to be and where more homeowners are realising the potential savings on offer and intermediaries’ remortgage business seeing tangible results.

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