"The stability brought by a new government, a predicted rate cut towards the end of summer, and increasing lending competition does offer cause for optimism but Q3 is expected to remain a challenging period"
As we entered Q2 2024, the remortgage market was well-positioned to build on a strong opening quarter, indicating significant potential for both immediate and future growth.
Figures from the FCA and the Prudential Regulatory Authority (PRA) for Q1 2024 demonstrated this ongoing progression, highlighting that the share of gross advances for owner-occupied remortgages increased by 3.5 percentage points from the previous quarter to 31.8%, though it remained 2.9 percentage points lower than the previous year.
In April, LMS's remortgage snapshot revealed a 4% drop in remortgage instructions and a 3% month-on-month decrease in pipeline cases. However, the month also saw a 9% increase in completed remortgages. Notably, over 22% of individuals reduced their monthly bills after refinancing. While some saw an average increase of £354.51 in their payments, others benefited from an average decrease of £343.85 monthly. The majority of those remortgaging either increased their total loan size (43%) or maintained the same loan amount (34%), with five-year fixed rate products being the most popular (44%), followed closely by two-year fixed rates (42%).
Moving into May, the Bank of England’s Money and Credit Report showed that net borrowing of mortgage debt by individuals decreased from £2.2 billion in April to £1.2 billion. The annual growth rate for net mortgage lending rose to 0.3% in May, after a rise to 0.2% in April (the first such rise in the growth rate since October 2022). Encouragingly, gross lending increased for the fourth consecutive month to £22.2 billion, up from £21.1 billion in April, while gross repayments saw an increase of £1.2 billion over the same period to £20.5 billion.
Net mortgage approvals stayed robust at 60,000, down from 60,800 in April and approvals for remortgaging (which only capture remortgaging with a different lender) also saw a slight decrease, from 29,900 in April to 29,600 in May
June presented a mixed outlook from a product perspective. Borrowers had access to 6,629 mortgage deals, the largest number since February 2008, according to the Moneyfacts UK Mortgage Trends Treasury Report. However, the average shelf-life of a mortgage dropped to 15 days, down from 28 days the previous month, due to lender repricing and swap rate volatility.
Looking through a consumer lens, Barclays Property Insights data showed that the cost of rent and mortgages stabilised considerably, increasing by just 1.5% year-on-year—the slowest rate of growth since March 2023. Additionally, household spending on utilities dropped by 15.6% due to falling energy prices, with further declines anticipated following the latest price cap decrease on 1st July. Consumer confidence also showed signs of recovery, with optimism about living within means and job security increasing.
Despite these positive indicators, mortgage searches were down across the board in June. According to Twenty7tec’s monthly mortgage report, purchase mortgage searches fell by 7.4% month-on-month but were only down 1.25% compared to the same period last year. Remortgage searches fell by 7.27% from May and decreased by 24.36% compared to the same period last year. BTL remortgage searches saw a 10.01% decrease in June 2024 compared to May 2024 and were down 24.59% compared to the same period last year.
This trend was reflected in LMS’s Monthly Remortgage Snapshot for June, which suggested around 32% fewer remortgages were completed in June, with instructions falling by 14% and a 9% cancellation rate. Pipeline cases also fell by 4% month-on-month.
In summary, while Q2 2024 showed promising signs of growth and stability across the remortgage market, market volatility remained and we saw a challenging end to the quarter. The stability brought by a new government, a predicted rate cut towards the end of summer, and increasing lending competition does offer cause for optimism but Q3 is expected to remain a challenging period for the remortgage sector from a seasonal perspective and in terms of the volume of product maturities.
