The remortgage market remained in strong health during the second quarter as all indicators in the LMS Quarterly HealthCheck Index increased.
The remortgage approvals indicator increased by 0.7 points whilst the borrowing costs indicator improved by 11.5 points in Q2 to stand at 71.1, the highest since Q1 2017
The homeowner equity indicator recorded a significant increase, rising by 3.1 points to 77.8, the highest reading on record.
Borrower sentiment recorded a third consecutive increase to stand at an all-time high of 62.0.
Nick Chadbourne (pictured), CEO at LMS, said: “The remortgage market witnessed an overwhelmingly healthy Q2, with continued growth across all key indicators. This pushed the index into entirely positive territory for the first time since the pandemic began and marked its highest overall score since Q2 2013.
“The notable improvement in the borrowing costs indicator score is promising. Despite a slight uptick in borrowing costs faced by lenders, two and five-year fixes have decreased in cost for a second consecutive quarter. This signals a positive outlook for the future, as it suggests that lenders are hesitant to increase costs to consumers, preferring instead to remain competitive by maintaining low rates.
“The second largest driver was an increase in the home owner equity indicator. This came as house prices continued to soar ahead of the stamp duty holiday deadline, incentivising borrowers to bring forward purchases. While we predict a marginal slowdown in the remaining quarters of this year with the SDLT tapering, house prices are set to remain high due to the extreme imbalance between supply and demand and increased affordability due to record low interest rates.
“Looking to the future, the only factors that are likely to disrupt the upwards trajectory of house prices are inflation and interest rate hikes, which have the potential to cause the market to turn. As long as interest rates remain low, demand will stay high. However, the market is vulnerable to hikes in the Bank of England’s bank rate. If this occurs sooner than expected, house prices could drop.
“Rising inflation poses an additional risk, if it forces the Bank of England to raise interest rates quickly in response. However, until supply is resolved, inflated house prices are set to remain, and we expect to see more borrowers opting to stay put in this environment, boosting remortage activity and contributing to a healthy remortage market for the next few months.”