"Remortgaging may appear relatively straightforward to homeowners who have already gone through the process, but this should not diminish the value offered by intermediary firms."
Before evaluating Q2 activity in and around the residential remortgage market, let’s look at the final official monthly figures from UK Finance for Q1 2019.
The UK Finance Mortgage Trends Update for March outlined that the remortgage market experienced a year-on-year increase, with 16,810 new remortgages in March 2019, 9.1% more than in March 2018. For these remortgages, the average additional amount borrowed was £55,700. Additionally, 15,030 were simple pound-for-pound remortgages (with no additional borrowing), 1.1% fewer than in March 2018. This was said to be the twelfth consecutive month of year-on-year remortgage growth, as a number of fixed-rate deals came to an end and borrowers continued to lock into attractive rates.
Moving into Q2, data from Moneyfacts predicted something of a remortgage surge over the second half of 2019 due to vast numbers of homeowners coming to the end of record low rates secured two years previously. It highlighted that the vast number of borrowers who benefitted from these low rates - a then average rate of 2.30% - could see their interest rate more than double when moved onto the average SVR currently sitting at 4.89%. This represents a significant increase and it was also good to see figures being bandied around in pounds and pence savings to draw attention to the potential financial benefits for such homeowners. Additional motivation which resulted in further uplift across the remortgage market.
In May, we saw the number of remortgages jump by 20%. The figures from UK Finance revealed that the number of remortgages completed in May grew sharply compared to the same month last year while purchases dipped slightly. Breaking this down, there were 21,370 new remortgages with additional borrowing in May 2019, 19.8% more than the same month in 2018. For these remortgages, the average additional amount borrowed in May was £52,000. 19,650 were pound-for-pound remortgages (with no additional borrowing), 19.7% more than in May 2018.
In addition, research from LMS also reflected this hike in remortgage business by reporting that volumes rose to a 12-month high. The data suggested that there were 53,624 remortgages in May, up from 52,745 in April, while the average loan amount also increased to £172,022. Five-year fixed rate products were again reported to be the most popular option, making up 44% of purchases in May, slightly below April’s figure of 48%. Two-year fixed rate products remained the second most popular option, making up 39% of purchases in May, an increase from 34% in April.
This continued upward trend provided a boost to the intermediary market and further illustrated the importance of the advice process as we moved into the back end of Q2. Remortgaging may appear relatively straightforward to homeowners who have already gone through the process, but this should not diminish the value offered by intermediary firms. Generally speaking, advisers will have access to whole of market deals which homeowners will not be in a position to consider or access.
This raft of data also illustrates the potential attached to the remortgage and product transfer market in the months ahead. A point further demonstrated within market data from CACI which shows that between June 2019 and October 2019 over £90.2 billion worth of residential mortgages and almost £8.3 billion worth of buy-to-let deals are coming to the end of their terms. With over £98.5bn of balances maturing from their current deal, with the vast majority moving onto follow-on rates above 3.75%, this equates to circa 1.4m customers who are likely to save money by remortgaging or simply switching rates with their existing lender.
This represents an unmissable opportunity for the intermediary market to continue to demonstrate support and offer value for clients who are approaching the end of their current mortgage deals or who may not have taken action previously and could benefit from a personal mortgage review. It will be interesting to see how these opportunities equate into remortgage and product transfer activity in Q3, so watch this space.