A mix of optimism and pragmatism : Barclays quarterly review

The first week of the first quarter of any new year is habitually shrouded in a mix of optimism and pragmatism. By its close there is often a more realistic sense of what the rest of the year may hold. Seasonal lulls and trends are factored into many different business sectors but these were not truly reflected across many areas of mortgage market in early 2016 and especially not within the remortgage sector.

Related topics:  Special Features
Craig Calder | Director of Mortgages at Barclays
6th May 2016
Craig Calder Barclays

Traditionally an ideal landmark in the calendar to reflect on financial commitments and aspirations it’s a time when the remortgage market should be at the forefront of homeowners minds, but this has not always been apparent in recent times. Having said this, lenders operating within the remortgage sector have worked hard to try and convey the benefits of remortgaging to the intermediary market/customers throughout 2015 and this message appears to be hitting home.

Before looking at Q1 figures in a little more depth, let’s firstly reflect on conditions leading into this important period. The Council of Mortgage Lender’s official lending figures for 2015 showed homeowner remortgage activity was up 11 per cent by volume and 20 per cent by value compared to 2014. Lending in Q4 2015 saw homeowner remortgage activity rise 4 per cent by volume and 6 per cent by value compared to the third quarter. Compared to the fourth quarter 2014, remortgage lending was up 21 per cent by volume and up 35 per cent by value.

This increase in activity inevitably led to a greater level of expectation for 2016. However, the turn of the year also saw European and global economic uncertainly continuing to cast a slight shadow over the UK. Not that this served to dampen activity within the remortgage market. If anything it encouraged greater numbers of savvy borrowers to realise the value attached to favourable conditions by locking into the low rates on offer.

This was highlighted in CML data for January which outlined that remortgage lending to homeowners saw substantial increases month-on-month (and year-on-year). So much so that it resulted in the highest lending amount borrowed in a single month for UK remortgage purposes since January 2009. Breaking down these figures, homeowner remortgagors borrowed £5.8bn, up 35 per cent on December and 32 per cent compared to a year ago. This totalled 33,100 loans, up 28 per cent month-on-month and 19 per cent on the same period in 2015.

These figures flew in the face of a relatively flat start to the year for house purchase lending and really underlined growing demand from homeowners and the attraction of some highly competitive deals within the remortgage market. Additional research from Connells Survey & Valuation reported that the number of housing valuations carried out in January climbed 52 per cent when compared to January 2015. The figure was said to have represented the fastest annual uptick in total valuation activity since July 2015, when volumes rose by 57 per cent on July 2014.

The buy-to-let and remortgaging sectors were reported to be the key drivers behind this strong growth. Annual valuation activity among homeowners looking to move was suggested to have grown by 27 per cent in January, while between December 2015 and January 2016 there was a 15 per cent uptick in the number of valuations for homemovers.

This positivity was also reflected in data released by LMS which implied that gross remortgage lending rose to a seven-year high of £6.2bn in January, representing a 49 per cent monthly rise. This was said to be the largest value of remortgage lending in a month since November 2008, when £7bn worth of loans was recorded. The value of gross remortgage lending was reported as being 45 per cent higher than January 2015’s figure of £4.3bn. The number of loans also increased by 44 per cent - from 25,500 in December to 36,666 in January - to mark the highest number of remortgage loans taken out since July 2009 when 39,500 loans were recorded.

Per customer, the average amount of equity withdrawn through remortgaging fell from £30,361 in December 2015 to £25,955 in January 2016. However, this was still the largest amount recorded in the month of January. Average equity withdrawn was also 36 per cent higher than in January of last year (£19,021). And the average remortgage loan size in January was said to have hit an all-time high of £170,319, up 8 per cent from December and 12 per cent year-on-year.

These January figures represented a great boost for the remortgage market and helped reflect the strong call to action being demonstrated by lenders and the intermediary community throughout the second half of 2015.

Unfortunately, the latest CML figures showed that these heights were not quite sustained. February saw remortgage activity total £4.8bn, a decline of 17 per cent from January. Analysing this data, February saw a total of 28,400 loans, a figure down 15 per cent month-on-month. But it was not all doom and gloom. It’s also important to note that activity levels reflected a rise of 37 per cent on figures registered in February 2015 and that the number of total loans was up 24 per cent compared to the same period last year. Similar to January, these significant gains represented the highest amount borrowed for remortgage purposes in the month of February since February 2009.

In conclusion, while the buy-to-let sector may have captured the vast majority of headlines in Q1 this should not detract from the performance of the remortgage sector. After coming out of the blocks a little faster than expected, activity may have slowed somewhat but despite this statistics continue to stack up favourably compared to 2015 and we can continue to look forward to a busy Q2.

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