A host of remortgage opportunities in Q3: Barclays Quarterly Review

In H1 2021, the remortgage market continued to tick along nicely as purchase activity and house prices continued to dominate the majority of mortgage-related headlines. This is a sentence I feel I have had on repeat for over 12 months now and it’s little wonder.

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Craig Calder | Barclays
13th August 2021
Craig Calder Barclays
"More advisers will be called upon to support those existing client banks to secure their remortgage requirements."

Months of “frenzied buyer activity” have driven the average asking price for homes in Britain to a new high, according to Rightmove, and the number of homes changing hands rose to the highest level on record in June, with 213,120 sales registered with HMRC. This flurry of activity made for the busiest month since the figures were first published in April 2005.

In short, it has been a phenomenal period for the purchase market. However, any broker with a decent-sized client bank also realises the ongoing importance attached to some highly competitive remortgage rates and incentives for an array of homeowners over this period. These low rates have allowed many to release equity to subsidise income, make home improvements or to simply cut monthly outgoings during a time when many people faced challenging short, or longer-term, financial scenarios.

When reflecting on market conditions in Q1, the latest Mortgage Lenders and Administrators Return (MLAR) statistics from the Bank of England outlined that the value of gross mortgage advances in Q1 was £83.3 billion, 26.5% higher than in 2020 Q1 and the highest level since 2007. The share of house purchase for owner occupation was 64.1%, up 17.3pp from Q1 2020. The share of gross advances for remortgages was 18.0%, a decrease of 14.2pp since 2020 Q1, and the lowest since these statistics began. Of the 64.1% of advances for house purchases by owner occupiers, lending to first-time buyers was 2.0pp higher than in 2020 Q1, at 21.8% of gross advances. The share advanced to home movers increased by 15.3pp on a year earlier, to 42.3%, the highest share for home movers since the statistics began in 2007.

As we entered Q2, although the industry was working hard to plough through the backlog of transactions and continued homebuying appetites, remortgage activity remained at a healthy level thanks to strong completions and fewer cancellations. According to research from LMS, despite remortgage instructions decreasing by 16.1% in April, 17.1% more remortgages completed when compared to March figures. Additionally, activity remained healthy over the month, with the overall cancellation rate decreasing by 0.3% to 6.47% and pipeline cases falling by just 0.7% in April.

Additional statistics from LMS for May highlighted that remortgage instructions grew by 9.7%. At the same time, there were 2% fewer remortgages completed on a monthly basis and the overall cancellation rate rose slightly to 6.1%. The May report added that average payment decrease for the 50% of borrowers who reduced their monthly payments was £441. And, in total, 16% of remortgagers reduced their total loan size by an average of £20,763. Meanwhile, 42% of borrowers covered by the report increased their monthly payment by an average of £511.

Of the 48% who increased their total loan size, LMS has calculated this to be by £9,926 on average. It was also suggested that the most popular product was a five-year fixed rate and the biggest reason to remortgage was to release equity, which accounted for 36% of the borrowers it covers.

These figures help illustrate the gradual rise in remortgage business being experienced across the market. With huge numbers of mortgage deals maturing in H2 2021 and the tapering of the stamp duty holiday coming into effect, then this balance will continue to shift and more advisers will be called upon to support those existing client banks to secure their remortgage requirements. Meaning a host of remortgage opportunities will continue to emerge in Q3.

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