fbpx

Remortgage market to become increasingly important in 2022

Simon Jackson

November 3, 2021

Simon Jackson is managing director at SDL Surveying

Understandably, after the end of the stamp duty holiday in September, many were wondering what the repercussions for the housing market might be in October. Would we see a notable drop-off in transactions similar to that which was evident in July?

As I write, we don’t have the actual transaction numbers but it wouldn’t be a great shock to see the numbers for October slightly down on September, however I don’t anticipate there having been anywhere near the same drop-off as earlier in the year when the full holiday ended.

Indeed, from our perspective, October turned out to be a very decent month, and you might argue that there was something of a traditional summer lull which we have already rebounded from.

Certainly we would anticipate the market is on course to hit the 1.4/1.5m mark in terms of annual transactions, which would be a considerable uptick on recent years.

The big question here however remains the supply of property coming to market – both new-build and ‘second-hand’. I spoke to Rightmove recently and they were of the opinion that daily stock levels coming onto the platform were holding up well – they had not slipped any further since the end of the holiday.

However, it’s clear that the stock which is coming to market is not hanging around. The average time to offer being just over a month which perhaps proves our own ongoing view that there remains a significant amount of demand in the market which is not going away. Housing that comes to market is getting sold quickly.

The bigger question around these immediate months is how the market might move in 2022? Our anticipation around purchasing is there will be a tail-off from the large numbers of transactions we’ve seen in 2021, but that it won’t be dramatic. In fact it will be back to pre-pandemic levels, perhaps even up on this, around the 1.2m mark.

However, if purchase business is down slightly, then the market will be even more focused on remortgaging/product transfers to make up for that shortfall.

In that sense, the signs are positive because we have a market which overall is highly competitive for consumers wanting/needing to remortgage and this looks unlikely to fall back, even if there is a lot of chatter about rises in interest rates.

Indeed, for advisers, that ongoing debate about when – not if – rates are likely to be moved upwards by the MPC, plays into the hands particularly of advisers who can push a marketing message that now is the time to look at remortgaging because rates are unlikely to be this low again.

The recent Budget effectively set in train the expectation rates will be on the rise soon. Inflation levels of over 4% are anticipated for the whole of 2022, and if you actually look at consumer price inflation, the real figure is going to be beyond 5%.

The Bank of England’s target is 2% and Rishi Sunak made a big play of the fact he has written to the bank reminding them of their responsibility in this area.

The markets have pretty much priced in a rise before Christmas, which will probably take us up to a BBR of 0.25%. Given the very low level of rates still, we must anticipate that a further rise or two might follow next year, and while lenders in a highly competitive market, will be loathe to raise their rates too much, we are now living in what is likely to be the low-water mark for mortgage pricing.

With the cost of living increasing and pricing for so many goods and services on the rise, advisers are pushing at an open door in terms of saving clients money on their remortgage, particularly if they are still one of the many millions of borrowers who (unfathomably) are still on their lender’s SVR when they could access far lower rates.

If purchase activity was the big mortgage and housing trend of 2021, then we are likely to see the returning dominance of remortgaging in 2022.

You should be able to kick off the year strongly by targeting your client banks now and outlining what is currently achievable and that these rates may not be around forever. Indeed, they for those on lower loan-to-values (LTVs) the trajectory is already upward.


Sign up to our daily email