"For advisers, the focus should be on guiding clients through this evolving landscape, helping them secure the best mortgage products for them at the right time"
In my last quarterly remortgage market review, I suggested that Q3 would remain a challenging period for the remortgage sector, from a seasonal and market perspective. As we look back on the past three months, it’s clear that while the challenges persisted, significant opportunities also emerged with the level of mortgage maturities remaining a critical driver of remortgage activity.
July: Modest growth in remortgage searches but approvals lag
Entering Q3, according to the Bank of England Money and Credit report, July saw a notable uptick in house purchase mortgage approvals, reaching their highest level in nearly two years. However, remortgage approvals took a slight hit, falling to 25,100, from 27,300 in June, continuing the downward trend observed since March.
Despite this, data from Twenty7tec showed that remortgage searches were up by 8.41%, over the course of the month, indicating growing interest from borrowers. The rise in remortgage searches suggests that while many may not have been ready, or able, to remortgage earlier in the year, the sheer volume of product maturities entering the second half of 2024 could light the remortgage market touchpaper. Buy-to-let remortgage searches were also reported to have increased significantly, up by 13.67%.
August: Five-year fixed rates dominate
In August, seasonal implications appeared to kick in with the LMS Remortgage Snapshot outlining that remortgage instructions were down by 2% compared to the previous month, which completions fell by 14%. Despite this decline, the pipeline of remortgage cases saw a modest 1% increase, to offer encouragement that activity levels may pick up in the months ahead.
From a product perspective, there was a clear indication that borrowers are prioritising certainty in their mortgage repayments, with 74% choosing a fixed-rate product and nearly half of those who remortgaged (45%) opting for a five-year fixed deal.
Notably, 50% of those who remortgaged increased their loan size, with an average increase of £19,913. However, many also faced payment shocks, with 67% seeing their monthly payments rise by an average of £329.81. The Snapshot added that 27% of borrowers remortgaged to release equity, and another 27% aimed to reduce their monthly payments.
September: Rising searches and instruction levels as seasonal uptick begins
September marked a welcomed uplift in remortgage activity, with Twenty7tec’s latest mortgage market statistics highlighting that while purchase mortgage searches were down 0.1% month-on-month, remortgage searches were up 11.9% compared to August 2024 and up 11.03% compared to the same period last year.
Although data from LMS reported 5% less remortgages being completed in September, complete with a 12% increase in the overall cancellation rate, a significant positive emerged in the form of remortgage instructions rising by 24% and pipeline cases by 2% month-on-month.
Looking ahead: Key opportunities for advisers
Looking ahead, LMS also gauged borrowers’ opinions on borrower expectations for interest rate increases. To which, 38% of respondents anticipated a rate increase within the next year and 18% thought that rate rises were more than a year away, while the majority – 44% – of borrowers had no expectation of a rate increase.
The Snapshot added that with over 33% of all 2024 product expiries set to occur in Q4, the rise in remortgage instructions is expected to continue. This corresponds with CACI data - compiled for the Barclays Market maturity and remortgage opportunities Market analysis July – December 2024 – which suggests that October is shaping up to be a pivotal month for the remortgage market, with £25 billion worth of residential mortgages and £3.4 billion worth of buy-to-let mortgages set to mature.
As we progress in Q4, the remortgage market offers considerable potential for growth, driven largely by these product maturities and ongoing Bank of England base rate uncertainly. For advisers, the focus should be on guiding clients through this evolving landscape, helping them secure the best mortgage products for them at the right time, and in providing valuable insights as market conditions continue to shift.
