They believe so as remortgage sales reach peak level since before the pandemic
With data showing that remortgage sales have been high recently, mortgage intermediaries expect remortgage activity to drive business levels over the next year, a new report from Paragon Bank has found.
Paragon’s Mortgage Intermediary Insight Report found that 74% of intermediaries believe that residential remortgage activity will be a key driver of business over the next 12 months, followed by buy-to-let remortgages at 56%.
Other sources of future business include: buy-to-let purchase (44%), first-time buyers (43%), and house movers (33%). Meanwhile, later life lending (33%) and equity release (21%) were also popular choices.
The report noted that remortgaging has been growing in prominence in the buy-to-let market this year as it marks five years since changes to mortgage underwriting regulations helped drive the growth of five-year fixed rate mortgages.
According to digital lending platform Freedom Finance, remortgage sales in Q4 2021 (92,558) reached its highest level of activity since Q1 2020 before the outbreak of the pandemic, and outnumbered all other types of home loans for the first time since Q3 2020.
In contrast, sales of mortgages for first-time buyers (112,005) and house mover mortgages (133,890) both reached a five-year peak in Q2 2021 but slumped in Q4 to 89,542 and 75,726, respectively. Freedom Finance noted that these mortgages had shot up during the pandemic as people took advantage of the stamp duty holiday, increasing household deposits and changing lifestyle to get on the property ladder or move on.
It added that this marks a continuation of the trend from ‘move’ to ‘improve’ as households prepare for a gloomier economic situation as the cost-of-living crisis bites and the Bank of England began to increase interest rates in December 2021.
Meanwhile, as part of the Paragon research, brokers were also asked what changes, if any, they have made to adapt to this shift towards remortgage business.
Just over four in 10 (41%) of intermediaries said they are placing a greater focus on client communication towards the end of the mortgage term, with brokers proactively engaging with borrowers 4.5 months ahead of product maturity, on average. A further one in 10 (11%) firms reported having streamlined compliance procedures, while just over one in 20 (6%) have put in place dedicated advisers to deal with remortgage business.
Brokers also provided insight into client behaviour with regards to remortgaging, revealing that they think just over half (52%) of borrowers would move to a new lender at product maturity. Asked what they feel their client’s top priorities are when deciding to remortgage, product rate, product fees, and ease were deemed to be most important to borrowers after being identified as top three priorities by 91%, 63% and 45% of brokers respectively.
Richard Rowntree (pictured), managing director for mortgages at Paragon Bank, related that, in 2017, the introduction of new underwriting standards made five-year fixed rate mortgages more popular among borrowers.
“With many of these loans now maturing, a rise in remortgaging was something we had expected and planned for. It is interesting to see that our experience has been shared by our intermediary partners and that many have been putting in place measures to adapt to this shift in business mix,” he said.
“Although rates and fees are unsurprisingly primary drivers behind borrowers’ decisions when remortgaging, we also see that aspects outside of cost, such as ease, speed and service, are also priorities. This highlights the benefit to the sector of improving the maturity and remortgage experience for customers.”
“The gloomy economic environment and the consecutive rate rises from the Bank of England are only likely to drive further demand in the remortgage market as borrowers look to lock in to fixed-rate loans either from variable rate mortgages or as their existing deals come to a close,” Andrew Fisher, chief commercial officer at Freedom Finance, added.