"Maximising remortgage business and focusing on client retention will inevitably remain high on the intermediary agenda moving forward."
Taking a look at the data behind this, the LMS Monthly Remortgage Snapshot showed that the volume of remortgage completions rose by 31% in July. Instruction volumes also increased by 27% over the same timeframe. The overall cancellation rate rose by 0.53% to 6% and pipeline cases increased by 14% in last month. Breaking this down further, the average monthly payment decrease for those who remortgaged in July was £124. A total of 49% of borrowers increased their loan size and 45% of those who remortgaged took out a five-year fixed rate product, which was the most popular product length.
In addition, an estimated 32% of remortgagers’ primary aim when remortgaging was to release equity from their property. The average loan increase post remortgage was £16,389, whilst the average loan decrease post remortgage was £8,144. Despite these healthy volumes, there was an expectation of a slightly higher figure give that July represented one of the biggest peaks in ERC expiries in the year. With that mind, lets see how the rest of the quarter faired.
Money and credit statistics from the Bank of England for August outlined that approvals for house purchases ticked down to 74,500 from a July figure of 75,100. This was said to be the lowest since July 2020 but remained above pre-February 2020 levels. Approvals for remortgaging with a different lender rose to 39,700 in August. This remains low compared to the months running up to February 2020 but, on a positive note, does represent the highest level since March 2020. This data supported sustained, if slightly lessening, demand from potential homebuyers and a buoyant remortgage market which was experiencing a range of homeowners switching to cheap fixed rate deals on the back of a hotly contested lending environment.
Moving into September, a mortgage market report from Twenty7Tec showed that remortgaging accounted for 38.8% of the mortgage market in September. This found that eight of the busiest days in 2021 for remortgaging took place in September, , while it was the lowest ranking month this year for first-time buyer searches. FTBs accounted for 18.8% of searches in September, down from 19.51% in August. This was despite the finding that there were more high LTV products on the market in September than in August.
September also saw research from Paymentshield highlight missed opportunities across the remortgage market. The analysis suggested that advisers could be losing around £16 million in commission each year by failing to quote clients on remortgage or product transfers. This showed that remortgage and product transfers account for around 20% of all mortgage transactions handled by intermediaries, which in turn creates an opportunity for approximately 208,600 approvals annually and a potential overall commission for advisers of just under £17 million.
Yet, indicative market research suggests that the actual quote commission earned by advisers each year for remortgage business is around £937,500, resulting in an earning blackhole of £16 million. This means that advisers are only quoting on 5-6% of the total remortgage opportunity. Advisers have been urged to tackle this disparity, particularly in the coming months as large volumes of five-year fixed-rate mortgages are set to mature following historic changes to tax regulations for buy-to-let landlords.
Looking forward, the vast remortgage potential was further outlined in data from CACI which illustrated that October is the biggest month of 2021 for remortgage maturities, with £38.9bn of business up for renewal.
In light of the sustained elevated levels of product maturity forecast over the course of Q4 and beyond, maximising remortgage business and focusing on client retention will inevitably remain high on the intermediary agenda moving forward. And long may this continue.