Craig Calder is director of mortgages at Barclays
The third quarter this year will soon see the back of some late summer sunshine but I’m sure that we’re all hoping for activity to heat up after the usual July/August lull within the UK mortgage market.
Looking at the Council of Mortgage Lenders data for July, this showed a month-on-month decline in activity amongst first-time buyers and homemovers, alongside a muted buy-to-let marketplace. Despite being a little disappointing, such findings are nothing new for this time of year and therefore are not too surprising or particularly noteworthy. As such it’s important not to read too much into them, especially in light of recent economic developments. On a more positive note this was also a period in which we have seen some levels of confidence and stability return to the market.
These vital components, which will help form the foundations for future growth, have been evident within a number of positive headlines emerging from the mortgage market in recent weeks and sentiments which were exhibited – if you’ll excuse the pun – at the recent Financial Services Expo London.
Reports from a host of seminars outlined many trends, outlooks and potential areas of growth. Inevitably challenges were also highlighted but when evaluating the current UK housing and mortgage markets an industry panel at the event painted a relatively optimistic picture looking forward. During the discussion it was reported that the panel agreed on the fact that the remainder of 2016 and 2017 would see a number of opportunities present themselves for mortgage intermediaries. A notable comment from this session came from John Coffield, head of Paradigm Mortgage Services, who said: “The broker market is in a quality place at present.” Adding that: “I would advise them to stay close to their clients and look into the remortgage opportunities that exist.”
From my perspective I can only agree that many of the current available and immediate opportunities for intermediaries will revolve around the remortgage market. A fact which was also outlined in July’s CML data which saw a month-on-month and year-on-year growth for remortgage lending. A total of £6bn was suggested to have been borrowed for remortgage purposes which, alongside April 2016, was said to be the highest monthly amount borrowed for remortgage purposes since January 2009.
Again, this data should come as no real surprise considering the fact that the remortgage sector has enjoyed a surge of activity of late. A fact which was also supported by additional data from LMS which suggested that the value of remortgaging hit £7.1bn in July, up by more than a quarter from the previous month, representing the highest amount for almost eight years. It was also said to mark an increase of 27% from June (up from £5.6bn) and a figure 42% higher when compared to the corresponding month in 2015. The number of remortgage loans was also suggested to have increased by 27% on a monthly basis, totalling 41,157, the highest seen since January 2009 and up 36 per cent from July last year.
It’s clearly a prime time to consider remortgaging, and many homeowners are currently capitalising on that fact to increase their loan size. Indeed, according to further statistics from LMS, the average remortgage rose to £172,184 in July, up 9% from £157,557 in June. The average LTV also increased from 54% in June to 58% in July. The surge in remortgaging meant the total amount of housing equity withdrawn via this route rose by more than a quarter (27%) from £951.8m to £1.2bn, the highest since April 2008 (£1.4bn).
Additional data outlined that the average loan that was remortgages fell by 15% to four years and three months, compared to the five year figure reported in June. This marked the lowest level since October 2009. This was also 18% – 11 months – lower than the average for July 2015 (five years and two months) as low rates were said to be tempting people to remortgage more frequently.
Another set of positive statistics further underlined the remortgage potential currently on offer. Figures released from Broker Conveyancing illustrated a 7% month-on-month uplift in remortgage instructions for August. When compared to August 2015 the point was emphasised with a reported 42% rise in remortgage instructions.
This raft of data helps to demonstrate the growing demand for remortgage business and just how many homeowners are realising the benefits of a low interest rate environment, not to mention the value attached to the current deals on offer.
Of course these benefits are nothing new to the vast majority of intermediaries but there are still some who are not tapping into its massive potential. Simplicity is often the key to many successful enterprises or marketing campaigns and this is also apparent when it comes to the messaging around remortgaging. The sheer volume and availability of a number of highly competitive remortgage products mean that huge savings can be secured quickly and with a minimum of effort for the right kind of clients.
Historically the remortgage market has often proved itself to be the ‘bread and butter’ of many intermediary offerings. Although it has underperformed somewhat in recent times, there is no shortage of evidence to suggest that it has returned to prominence over the past 12-18 months. And, as long as you don’t let your communications go stale, the right kind of interactions with clients banks will continue to generate a wealth of remortgage opportunities for the rest of 2016 and beyond.