"An even greater proportion of homeowners and landlords will rely on the advice process to cut through market complexity"
We don’t have to dwell too much on the immediate aftermath of events which transpired in late September to realise that coming into Q4 was a hugely uncertain time for the lending community, first-time buyers, landlords and homeowners across the UK. So, let’s focus purely on activity levels as we entered what can only be described as a transitional period for the mortgage market.
As outlined in data from Twenty7tec, October 2022 was reported to be the third-busiest month ever for total mortgage searches – just behind March 2022 and September 2022. Tellingly, the first week of Q4 saw the most remortgage searches ever on the platform. October ended 52:48 for purchase v remortgages, however, the second half of the month was 57:43 in the favour of purchase business and the first half was 60:40 remortgage business, which certainly represented a month of two halves.
October saw a big increase in remortgage completions. This was evident in data from LMS which suggested that remortgage completions rose by 35%, while instructions increased marginally by 0.27%. Within these figures, 44% of borrowers increased their loan size in October and 65% took out a five-year fixed rate product. 33% said their main aim when remortgaging was to gain longer term security, the most popular response.
Moving into November, according to Money and Credit statistics from the Bank of England, mortgage approvals for house purchases decreased to 46,100, down from 57,900 in October to the lowest level since June 2020. November approvals for remortgaging with a different lender fell to 32,500 from 51,300 in October and were below the previous six-month average of 48,100. Falling approvals came as the average interest rate paid on newly drawn mortgages increased by 26 basis points to 3.35%. In addition, gross mortgage lending decreased from £27.7 billion in October to £25.7 billion in November, while gross repayments dropped from £25.8 billion to £21.6 billion.
November also saw the highly anticipated Autumn Statement offer some much needed economic and market confidence. This led to more homeowners adopting a wait and see attitude in the wake of signs of some positive mortgage rate trends and lenders returning to the market following a temporary absence.
This trend continued into December, with data from LMS suggesting that there were 17% fewer remortgages completed in December when compared to November figures with pipeline cases falling 10% month-on-month. 43% of borrowers increased their loan size in December with 72% increasing their monthly remortgage repayments to reflect the rise in mortgage rates.
Looking forward, there are plenty of reasons to expect stronger levels of activity across the remortgage market in 2023. ONS data shows that the majority of fixed rate mortgages in the UK (57%) are coming up for renewal in 2023 and, in the first quarter of this year, 353,000 fixed rate mortgages are set to mature. ONS’ calculations, based on Bank of England transactions data, suggest that the number of fixed rate mortgage deals coming to an end in 2023 will peak in Q2 2023 at 371,000.
Additional research from Paragon Bank suggests that remortgaging will dominate intermediary business in 2023 with 78% of brokers believing that remortgaging will be the strongest driver of business over the next 12 months. Followed by buy-to-let remortgaging, cited by 51%.
The research went on to add that, in terms of product popularity, brokers were split on whether borrowers would opt for the certainty of a fixed rate mortgage or cheaper variable options. The most popular choice was five-year fixed rate mortgages at 49%, followed by Base Rate trackers or variable products with no early redemption charges (47%) and then two-year fixed rate mortgages (44%).
Q1 certainly represents an interesting time for the mortgage market. On a positive note, opportunities will present themselves from a remortgage perspective and an even greater proportion of homeowners and landlords will rely on the advice process to cut through market complexity and deliver the right solution to match their presents and future needs.
