"Product transfers will inevitably play a significant role within these business volumes and it will be interesting to see how this translates across the remortgage market in Q4"
It’s always important to note that conditions in Q3 of any given year tend to be subject to seasonal influences and can sometimes skew perceptions regarding business volumes and activity levels if taken in isolation. Having said that, Q3 saw the remortgage market get off to a positive start.
July’s Money and Credit statistics from the Bank of England reported that net borrowing of mortgage debt by individuals increased for the third consecutive month to £0.2 billion in July, from £0.1 billion in June. Although net mortgage approvals decreased from 54,600 in June to 49,400 in July, approvals for remortgaging slightly increased from 39,100 to 39,300 during the same period.
It’s fair to say that these aforementioned seasonal influences did kick in during August as, unsurprisingly, activity levels plummeted across the mortgage market. This was evident in August’s Monthly Remortgage Snapshot from LMS which revealed that there were 10% less remortgages completed in over the course of the month when compared to July figures, while the overall cancellation rate increased by 0.52% to 6.29%.
Encouragingly, pipeline cases were reported to have increased by 2% month on month. In addition, 40% of borrowers were reported to have increased their loan size in August, while 48% of those who remortgaged took out a five-year fixed rate product.
The research also outlined that the average remortgage loan amount in London and the South East was £290,250 while the average for the rest of the UK stood at £151,457, putting remortgage loan amounts 62.8% higher in London and the South East than the rest of the UK. Although this percentage figure of 62.8% remained high, this marked a significant fall from July’s snapshot when a 98% difference was identified.
Reverting back to the BoE data for the month, this further emphasised this lending lull with net mortgage approvals for house purchases falling from 49,500 in July to 45,400 in August, the lowest level in six months. Approvals for remortgaging with a different lender also saw a significant decline from 39,300 in July to 25,000 in August, the lowest since July 2012 (24,400).
Moving into September, some steadier rate conditions were suggested to have buoyed activity levels across the mortgage market despite longstanding affordability concerns. This was according to data from Legal & General Ignite which added that, although a large proportion of market activity was being driven by first-time buyers, existing homeowners also showed a healthy level of engagement during the month.
The data went on to suggest that searches on behalf of borrowers looking for second residential mortgages grew by 8% in September, while those for capital-raising mortgages increased by 3%. Capital raising was reported to be the third most popular criteria in all searches, adding that while some homeowners will be keen to release funds for expenses such as home renovations, others will be doing so to consolidate existing debts in the strained financial climate.
In contrast, research collated by Twenty7tec showed that September was the quietest month for mortgage searches in 2023, with purchase searches down 5.4% compared to August. Searches by first-time buyers were said to be down 6.2% nationwide in September, the quietest month since November 2020, although on a more upbeat note, remortgage searches were only reported to be down 0.2%.
In our Q2 remortgage market review, it was highlighted that H2 2023 had been pinpointed as being one of the remortgage market's busiest periods since 2008, with well over half a million people expected to remortgage over this six-month timeframe. Product transfers will inevitably play a significant role within these business volumes and it will be interesting to see how this translates across the remortgage market in Q4 as some steady downward mortgage rate movement may entice more homeowners to act sooner rather than later.