Will rate rise setback dampen the remortgage surge?

Looking at the impact Carney can have on remortgaging, I wouldn’t be surprised if the nation’s lenders, brokers and (dare I say it) the UK’s leading conveyancing distributor will be lobbying, perhaps hounding, Carney to once again push the potential for a Bank Base Rate rise to the top of existing borrowers’ agendas.

The reason for this is quite obvious if you look at the recent remortgaging data coming out of the market. Just last week we had the latest statistics from the British Banking Association for September which outlined how remortgage approvals for September were 40% higher than the same month a year ago. Broker Conveyancing’s own recent data also revealed that remortgage completions during quarter three this year were 22% up on the previous quarter.

It would seem that something jolted many of the nation’s existing borrowers during the summer months into looking at the remortgage options that exist and, for the most part, looking at moving to a fixed-rate product. The reasons behind such a remortgage surge should be obvious to all and lie with the public pronouncements of Carney and, to a lesser extent, the rest of the Monetary Policy Committee team.

Just prior to the summer, you could not move for comments from our central bank employees around the potential for a BBR rise in the very near future. Indeed Carney himself seemed to be preparing the ground for a rise before the end of 2015 and was urging borrowers to take action (if they could) and look at their level of indebtedness before the cost of their borrowing inevitably took an upward trajectory.

Given the focus on delivering this message – which effectively boiled down to, ‘Rates will rise in 2015’ – it is perhaps no wonder that existing borrowers, especially those on variable rates, were quick out of the blocks in their quest for a fixed-rate deal. The numbers coming through now show the boost to the remortgage market during that period, and I suspect that the applications and completions coming through the pipeline in the months ahead will continue to show the trend moving in the right direction.

However, given recent mutterings from Carney himself and a more muted economic performance and outlook, we perhaps shouldn’t expect this remortgage surge to last too long. Indeed, it appears that Carney is already looking to dampen down rate rise expectation suggesting it was a “possibility not a certainty” – somewhat ironic one would think given that, just three months ago, a rate rise was being peddled as a nailed-on certainty.

So, what does this mean for advisers? Well, only time will tell, but one can’t help feeling that existing borrowers, especially those on BBR trackers and discounts, may now see the ongoing value in staying put rather than running to embrace slightly more expensive fixed rates. Indeed, with growing suggestions that a BBR rate rise could be at least another year away, the value may still lie in shorter-term (or lifetime) variable rates.

If this does turn out to be correct, then advisers may well be looking back to the purchase market for the bulk of business. However, as always, the important point is to make the most of those new (and existing) customers by making sure, firstly, that all cross-sales opportunities are covered off and executed especially conveyancing, and secondly, by continuing to work the client back book in a marketplace where highly competitive mortgage deals remain the norm, but also where money can be saved for clients in other areas such as protection and general insurance. Remortgage activity may rise and fall but the most successful firms will be those who are able to make the most of the clients they have.