"Plenty of encouraging signs have emerged over the back end of 2023 across the remortgage market and wider lending landscape to generate some increased optimism and competition."
We’ve seen some relatively bleak, but largely unsurprising, lending figures recently materialise from UK Finance for 2024. However, on a more positive note, the trade body also outlined that the main pressures on affordability appear to be peaking. In addition, plenty of encouraging signs have emerged over the back end of 2023 across the remortgage market and wider lending landscape to generate some increased optimism and competition.
When looking back at the transition into the final quarter of the year, this growing optimism was reflected in the Bank of England’s Mortgage Lenders and Administrators Statistics for Q3 which showed that the value of gross mortgage advances increased by 18.6% from the previous quarter to hit £62.2 billion, representing the first increase since 2022 Q3.
Data from the Intermediary Mortgage Lenders Association (IMLA) also outlined some promising progression. Although intermediary confidence in the outlook for the mortgage industry fell in July, with 51% of advisers describing themselves as ‘fairly confident’ and only 13% ‘very confident’, sentiment had greatly improved by September, with 63% saying they were ‘fairly confident’ about the future.
This growing confidence was evident throughout the early weeks of Q4 as the base rate continued to hold steady and enhanced levels of competition resulted in some tentative rate reductions which would certainly pick up pace over the course of the quarter. It’s fair to say that while October was not a particularly memorable month from a transactional perspective, it did provide a solid base on which to build in the run-up to the festive period.
Moving into November, it was interesting to note that, although purchase mortgage searches remained flat, remortgage searches were up 9.9% when compared to October 2023 figures. This was according to market analysis from Twenty7Tec which also highlighted a yearly high for mortgage product availability (18,625) towards the end of November. This signified a marked improvement on the lows experienced back on 4 July when there were considerably fewer products on the market (13,338).
When it came to new approvals for remortgaging, Bank of England data for the month outlined an increase from 24,000 in October to 27,000 in November, while new mortgage approvals for house purchases also rose from 47,900 to 50,100.
The forward momentum on show across the mortgage market continued into December with the choice of mortgage products escalating month-on-month, including those for borrowers with a smaller deposit or equity. The incentive to refinance also appeared to intensify for many borrowers as the year came to a close, especially for those sitting on a standard variable rate (SVR).
This was certainly apparent in the LMS Remortgage Snapshot for December which showed that 49% more remortgages were completed over the course of the month as rates continued to fall. Breaking this down, 40% of borrowers were reported to have increased their loan size in December with 42% of those who remortgaged taking out a two-year fixed rate product, which proved to be the most popular product. 33% said their main aim when remortgaging was to lower their monthly payments, the most popular response.
Looking ahead, a plethora of underlying market trends are slowly shifting the focus from product transfers back onto the more traditional remortgage marketplace. And with competition heating up from a lending perspective, it will be interesting to chart these shifts and how this translates into activity levels and volume across the remortgage sector in Q1 2024.
