"There is every reason to suggest that Q4 will be as busy, or even busier, for intermediaries who are active in the remortgage market."
Our Q2 remortgage review ended on the bombshell of market data from CACI highlighting that over £90.2 billion worth of residential mortgages and almost £8.3 billion worth of buy-to-let deals were coming to the end of their terms in Q3/Q4 2019. Figures which represented an unmissable opportunity for the intermediary market.
As we sat on the cusp of Q3, the remortgage market was said to have retained a neutral heath rating and was credited with supporting the wider mortgage market. The LMS Remortgage Healthcheck Index for Q2 2019 produced an overall health score for the remortgage market of 49.3, down from 51.3 in Q1. This Index tracks changes in four key indicators: volume of approvals, borrowing costs, homeowner equity value and consumer sentiment. Each indicator is scored between 0 and 100, with scores between 40 and 60 considered neutral, a score below 40 considered negative, and scores over 60 seen as positive for the industry. Remortgage approvals came in at 42.6. Despite a decrease of 10.7, down from 53.3 in Q1, the indicator demonstrated that the wider mortgage market was still being driven by existing homeowners.
There’s no doubting the fact that current economic and political uncertainty is causing some borrowers to adopt a ‘wait and see’ approach and therefore improving, rather than moving. For this reason, over a quarter of LMS borrowers (26%) said that releasing equity was their primary reason for remortgaging, with more than half of this group (51%) planning to use these funds for home improvements.
Moving into Q3, the red-hot remortgage market reflected a scorching July across the UK with historically low mortgage rates capturing the attention of homeowners and tempting some new borrowers into the market. Figures from e.surv further emphasised the importance of the remortgage market in terms of activity levels, especially when compared to a ‘stalling’ wider housing market. The research found that there were 65,770 residential mortgages approved during July - 0.8% higher than the same point in 2018, but a fall of 1% compared to June 2019’s total. In addition, UK Finance’s Mortgage Trends Update for July outlined that there were 20,760 new remortgages with additional borrowing in July, 7.1% fewer than the same month in 2018. For these remortgages, the average additional amount borrowed in July was £55,500.
August saw UK Finance’s Mortgage Trends Update illustrate that there were 18,640 new remortgages with additional borrowing over the course of the month, 2.9% fewer than the same month in 2018. For these remortgages, the average additional amount borrowed in August was £55,000. There were 18,100 new pound-for-pound remortgages (with no additional borrowing) in August 2019, 2.3% fewer than in the same month a year earlier.
Data from LMS showed further increases in remortgage volumes throughout August, despite some consumer pessimism over interest rates. The volume of remortgages rose to 53,141 in August, up from 52,869 in July. In terms of rates, purchases of five-year fixes fell from 50% to 48%, while there was a slight increase in two-year fixed rate deals from 34% to 35%. 10-year fixes showed no real rise in popularity, with the figure for August holding steady at 5%. Nearly two thirds of borrowers surveyed by LMS said that they expected interest rates to rise within the next year, despite reports that wider economic conditions could cause base rates to fall. 59% predicted a rise at some point in the next 12 months, while 27% thought this will be more than a year away, and 14% didn’t expect any change.
Aligned with this data was commentary from Nick Chadbourne, CEO of LMS, who said: “With a significant peak in early redemption charge expiries on the horizon for October, we’re expecting a steady ramp up in remortgage activity over the next few months. Volumes are already up month-on-month and this trend should continue in Q4 as remortgaging continues to outperform other areas of the market.”
In all honestly there is little more I can add to this statement, accept that - from an internal perspective - September and the first few weeks of October certainly reflect these sentiments. And with a large number of deals coming to an end in the coming weeks and months, there is every reason to suggest that Q4 will be as busy, or even busier, for intermediaries who are active in the remortgage market.