The market’s current undererformance has been due largely to ‘large gaps in consumers’ knowledge’, but as more borrowers are starting to seek advice, and more advisers are being more proactive, there is cause for optimism.
When reflecting on the current conditions of the home remortgage market it would be worthwhile revisiting the past to get an idea of what kind of base we are working from.
So, briefly travelling back in time, 2014 was something of a game of two halves. The early months saw a lot of activity across many sectors and uplift within the housing market. Then, largely due to MMR implications, we experienced a sustained period of subdued lending conditions over the second half of the year. Not that this lull had a lasting or major effect on the wholesale lending community. If anything it allowed the market to regroup and formulate a more robust proposition moving into 2015.
As this year dawned, most lenders were in a far better place than they had been for years. General market and economic conditions appeared relatively stable, with MMR ramifications, on the whole, having been ironed out. Competition among lenders was rife, with ‘rate wars’ emerging, and when aligned with some lingering interest rate speculation and political uncertainty, conditions appeared good for a remortgage market renaissance. But still the activity and volume within the sector did not truly reflect such favourable conditions. The question was: why?
In Q4 2014 research was produced which went some way towards answering this question, showing that:
• six out of 10 home-owners were confused about when interest rates may rise,
• almost half (46 per cent) of home-owners were unable to recall the level of the current Bank of England base rate,
• nine in 10 (88 per cent) were completely unaware of the BoE’s recent interest rate forecast, and
• half of home-owners with variable rate mortgages were not aware that their repayments could rise in the following year.
This research highlighted some large knowledge gaps among consumers; gaps which could be fairly easily plugged by proactive intermediaries. It also underlined that if this potential could be successfully tapped into, the remortgage market could begin 2015 with a real bang.
However, while recent CML data suggested a Q1 uplift for remortgage business, it sadly outlined more of a whimper. The data showed remortgage lending to have increased quarter-on-quarter, with 75,400 loans advanced – up 3 per cent on the fourth quarter of 2014, but down 5 per cent on the same quarter last year. The value of these loans (£11.8bn) was also reported to have increased quarter-on-quarter by 6 per cent, and by 2 per cent year-on-year compared to Q1 2014.
Despite some frustration surrounding the remortgage market still not living up to its full potential, it was evident that strides were being made in the right direction, at least in terms of increasing consumer recognition of the advice process. According to research from legal conveyancing firm LMS, more than two-fifths of remortgagers were reported to have consulted an independent adviser or broker in April, up from 39 per cent in March and 36 per cent in February.