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.
It is clear that education remains the key to ensuring that more home-owners are realising the benefits attached to remortgagingDespite 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.
These are positive statistics. It is clear that education remains the key to ensuring that more home-owners are realising the benefits attached to remortgaging. And it is important to continue this momentum over the rest of the year.
So how can we sum up the performance of the remortgage market over the first half of 2015?
Well, in terms of products, the market remains hugely competitive. There are some hugely attractive deals out there, and an increasing number of good options for higher LTV borrowers. Inevitably, though, there do remain a few negatives to overcome. The largest of these are lingering affordability problems, a still sizeable lack of borrower awareness and/or appetite for change, and the number of home-owners sitting on rock-bottom rate trackers.
This is reflected in BoE data showing that remortgage lending accounted for 32 per cent of the total market in May. This actually signifies some positive movement, but when compared with the 50 per cent market share held at the end of 2008 it becomes clear just how much the market is currently underperforming.
The figures certainly do not lie, but when you consider that, according to the CACI mortgage market database, the final two months of H1 2015 saw estimated market maturities of £10.5bn (May) and £9.7bn (June), then it is obvious just how much potential remortgage business there is out there. And it will be interesting to see how this converts in terms of upcoming official lending figures.
We are now well into the second half of this year, and with some optimism emerging, might we see this year repeating 2014’s year of two halves, only this time with H2 overshadowing H1?
Well, the signs are good, especially considering the sheer volume of opportunities being generated. Harking back to the CACI mortgage market database, even larger mortgage maturity numbers are looming, particularly in September, November and December.
These are huge figures, around which proactive intermediaries should be planning a variety of activity. As mentioned earlier, it has been great to see more borrowers actively seeking remortgage advice. Intermediaries need to be arming themselves with the right kind of tools to identify and maximise these opportunities.
Focusing back on the remortgage crystal ball, it was interesting to read a study by the Nottingham Building Society suggesting that growing numbers of intermediaries are recognising this. It found that 58 per cent of brokers expect a rise in remortgaging inquiries in the coming 12 months, with nearly one in 10 (9 per cent) forecasting a dramatic increase.
More positive signs than negative ones continue to emerge within this sector over the current, short and medium term. While remortgage business has been relatively slow over the course of the first half of the year, and challenges remain, there is certainly some renewed cause for optimism. This is especially apparent in light of the recent comments from Bank of England governor Mark Carney hinting at a potential interest rate rise around the turn of the year. Having said this, the path to recovery will be a slow and steady one. We should not expect the market to explode into life any time soon, but it is evident that more opportunities are opening up on a monthly basis. And it will be those intermediaries who are optimally tuned into these who will be reaping the rewards in the coming months.
Jackie Uhi is managing director of mortgage distribution at Barclays
Key points
As 2015 dawned, most lenders were in a far better place than they had been for years.
More than two-fifths of remortgagers were reported to have consulted an independent adviser or broker in April.
The signs are good for the remortgage market, considering the sheer volume of opportunities being generated.
