"As you may have seen from your own clients, remortgage activity is not consigned to those who just want a like-for-like loan with cost certainty."
And generally, with a few caveats, that is good news for the advisory profession because change stimulates activity, especially in a rising interest rate environment such as today’s.
At the moment, a significant amount of activity is coming through the remortgage and PT space. Which is not to say that purchase demand has dived or that consumers don’t want to buy – far from it, they do, however it is as always, the supply of property coming to market that will determine transaction levels.
That said, judging by the run rate of transactions, I anticipate we’ll see in the region of 1.3m purchases during 2022, which of course will be down on last year but certainly holds its own against any other prior year.
But, back to remortgaging, because it’s evident that the multiple increases in BBR and the ongoing increases in product pricing are on the radar of borrowers. Or at least they should be – particularly those who are currently sitting on variable rates or SVRs.
And it’s not just those due to remortgage in the next few months who are noticing and wanting advice on whether to act or not. Recent research from L&G Mortgage Club suggests searches for homeowners wanting to remortgage after just six months rose by 20% over the month, with these borrowers clearly after a greater degree of payment certainty than they feel they currently have.
This is of course likely to be a decent opportunity for advisers because these are borrowers who are not necessarily looking to save money. Indeed, if they secured a mortgage six months ago then the likelihood is they will be remortgaging to a higher rate now, plus of course any potential ERC they may have to pay.
It’s clearly more to do with borrowers looking to ensure their payments do not increase any further over the next two/three/five years. So, those on variable rates may have seen their payments go up to say £600 recently, which is still okay for them, but by remortgaging to a fixed rate they want to ensure that payments do not go up to £700-plus as rates make, an inevitable move upwards.
As you may have seen from your own clients, remortgage activity is not consigned to those who just want a like-for-like loan with cost certainty. There is still a considerable amount of capital raising taking place, with existing homeowners – who have decided not to move – looking to release equity in order to fund the extension or loft conversion.
Movements in BBR and product rates have pricked up their ears of these borrowers as well, recognising that now is likely to be a good time to secure the extra funding they need, with again the likelihood that three/six months down the line, they will have to pay more. We all need to bear in mind that in October/November last year, you could get a five-year fix below 1%, now you would be fortunate to secure one below 3%.
Pricing has moved fast and will continue to do so. Again, that presents an opportunity for advisers however I would wish to caveat product rate changes with some of the intra-day repricing we have seen in recent months, with little to no notice.
That is of course incredibly frustrating for advisers, and while I recognise again the speed of change in the mortgage market, my view is that some lenders could do a lot better in this area around product/criteria changes and the notice provided to advisers in order to ensure they do not miss out on better rates
HSBC recently said it will helpfully increase the withdrawal notice it provides from one day to two days, which given that some lenders can’t provide two hours’ notice is a real positive that I hope others will be able to follow. Chris Pearson, Head of Intermediary Mortgages at HSBC, pointed out why it’s so important, especially in this current environment: “Lenders have to balance a rapidly changing rate environment, not just from the obvious commercial perspective, but also to ensure service levels don’t get rapidly overwhelmed resulting in unwanted delays for advisers and added pressures for colleagues working to process cases.
“Advisers have a difficult job to keep on top of all the product and policy changes, and we appreciate the hard work they do, and we want to help them where we can. At HSBC UK, we’ve listened to the feedback from brokers and wherever practicably possible we’ll aim to give as close to 48 hours’ notice of withdrawing a product or rate, versus the general market norm of around 24 hours or less. There may be a ‘trade’ between this extra notice period and the knock-on service impact, but we trust that advisers fully understand that particular equation, giving more time to talk to customers and provide the necessary documentation with the case.”. We applaud HSBC for yet another example of the bank appreciating the needs of advisers.
It's a tricky area to navigate for lenders, but if there was a move to an industry ‘standard’ when it came to a notice period, then as Chris Pearson mentions, this would be to the great advantage of advisers and their customers.
