"Looking at Q4 as a whole, it was a tough period for the mortgage market due to the aforementioned widespread political turmoil."
Let's begin the final remortgage review of the decade by retracing our steps and picking up from where we left off in Q3, which was on a largely positive note.
According to LMS’ Remortgage Healthcheck Index for Q3, the remortgage sector kept the mortgage industry buoyant in the face of slow house price growth to further underline its continued importance for lenders and intermediaries. The Index reached a score of 50.2 in Q3 2019, a rise of 0.9 points from 49.3 in Q2 to give a neutral overall score. Remortgage approvals rose by 5.5 points, boosting the overall score of the healthcheck.
Additional end of Q3 data from Experian’s monthly credit barometer showed that over a quarter (28.7%) of September’s mortgage searches via the service were for remortgages, up from 23.4% last year. Breaking this down into product choice, 91.3% selected a fixed monthly repayment option in September, with only 5.6% searching for a variable interest rate deal and 3.1% for a tracker.
This data provided a strong platform to suggest that remortgage business would continue to prop up the wider mortgage market in Q4, although lingering clouds of political uncertainty were destined to cast a heavy shadow.
Moving into Q4, the first official data for October – the Mortgage Trends Update from UK Finance - saw new remortgages with additional borrowing fall by 20.8% when compared to October 2018 figures, with 18,910 cases being completed. Meanwhile pound-for-pound remortgages, without additional borrowing, also plunged 20% year-on-year when 20,660 completions were recorded.
Mortgage market indicators generated by Money and Credit statistics from the Bank of England pointed to “continued stability". Mortgage approvals for remortgages were reported to have risen to 51,000 in October, the highest figure seen since August 2018 and above the six-month average of 48,423. Net mortgage borrowing by households hit £4.3 billion in October, £0.4 billion higher than in September.
October was a particularly turbulent month in terms of the fresh Brexit plans, the sending and non-sending of letters, a special Saturday sitting of Parliament, revisions to bills, further Brexit delays and the subsequent announcement of a General Election. All of which impacted activity across all sectors of the mortgage market to some degree.
November saw UK Finance’s Mortgage Trends Update outline that there were 18,610 new remortgages with additional borrowing recorded in November 2019, 5.7% more than in November 2018. For these remortgages, the average additional amount borrowed was £51,470. There were 18,470 new pound-for-pound remortgages (with no additional borrowing) over the course of the month, 12.4% fewer than in November 2018.
When it came to product type, the vast majority of people who remortgaged property in November were suggested to have taken out a fixed rate product, with five-year fixes still the most popular product type. According to the LMS Monthly Remortgage Snapshot for November, five-year fixed rates were taken out by 43% of remortgage borrowers, down from 46% in October. Ten-year fixes were not suggested to have made significant inroads despite some competitive rates emerging, although take-up did increase slightly from 3% to 4%
Further data from the Snapshot highlighted that more than four in 10 remortgagers (42%) increased their total loan size, 32% saw no change in their total loan size and 24% reduced their loan. This resulted in monthly mortgage repayments rising for 45% of remortgagers, no change for 14% of borrowers, while 41% reduced their monthly repayments. The average fall in monthly payments for those remortgaging was £200.82 while for those who increased their monthly repayment, the average rise was £168.
December is always a tricky month in terms of seasonal lulls and a festive period which seems to get longer every year. Throw a General Election into the mix and it’s inevitable that some potential buyers and homeowners would continue sitting on the fence and waiting for a little more political and economic stability.
Looking at Q4 as a whole, it was a tough period for the mortgage market due to the aforementioned widespread political turmoil. Whilst this was not entirely unexpected, there have been obvious repercussions in terms of demand and business volumes being written across many sectors. However, it is certainly not all doom and gloom. Initial indicators suggest that the housing and mortgage market appears to be experiencing an uplift on the back of improved sentiment and additional political stability following the General Election outcome. We've already seen a number of lenders – including Barclays – reduce rates and evaluate lending propositions. In light of this growing competition and speculation mounting over a potential interest rate cut, the first quarter of the new decade could spark some heightened demand in both the purchase and remortgage markets.
So, watch this space.