LMS’ 2021/2 annual Snapshot reveals remortgaging activity trends across 2021 and gives predictions for the 2022 market.
Key activity in the remortgage sector last year included increased instructions as borrowers shopped around for better deals. Completions also increased as industry capacity grew, and cancellations decreased as the market stabilised.
The average monthly payment decrease for those who remortgaged in 2021 was £225, with 49% of borrowers increasing their loan size. Five-year fixed rate products were most popular in 2021 with 52% opting for these above other fixed rate products.
The most common reason for remortgaging was to release equity in property (30%).
Nick Chadbourne, CEO at LMS commented:
“Remortgage activity picked up the pace in 2021, with a steady increase in both instruction and completion volumes after the Stamp Duty Land Tax holiday extension was announced in March. The extension took pressure off the purchase market and gave the industry more time to focus on remortgaging.
High levels of instructions and completions volumes continued to build throughout the year, with pipelines reaching a peak in Q4 in the lead up to a peak in ERC expiries on 31st December 2021.”
Changing attitudes to the covid-19 pandemic and permanent business decisions regarding hybrid working fuelled many homeowners to find the right space. Some made the decision to move, adding further pressure to the purchase market and increasing prices. For those homeowners who decided to stay put, many invested into their properties to make home working more palatable and enjoyed the rising house prices as a means of releasing equity.
But the report finds that in the final quarter of 2021 consumer confidence waned due to rising inflation and increasing interest rates.
Chadbourne, continued:
“Rates will continue to rise in 2022 and lenders will change their pricing strategies, making it even more essential for borrowers to shop around to find the right deal. This, paired with such large volumes of ERCs in the second half of the year, will create a very busy remortgage market.”
Low interest rates dominated the headlines in 2021, which is reflected in fixed term product purchasing habits. Five-year fixes continued to be most popular product, although there was a short-lived spike in the popularity of two-year fixes in Q3 as borrowers were tempted by the record-breaking low interest rates for these deals.
“However, as rumours of a Bank of England base rate gained momentum in Q4, borrower purchasing habits reflected scepticism over the longevity of low rates and longer-term fixed rate products widened the lead once more. As rates continue to rise through 2022, the move away from 2-year rates will continue,” said Chadbourne.
Looking ahead to the rest of 2022, LMS data predicts a busy remortgage market driven by two-year and five-year product expiries. Bank rate increases, energy crisis and post-furlough jobs will all play a part in activity trends, and industry collaboration and tech innovation will be key to success in the industry.
Chadbourne, commented:
“Looking ahead to 2022, we will see the first effects of two major product purchasing events. Two- year fixes taken out when the property market reopened in 2020 will begin to expire, along with 5-year fixes which were taken out in 2017, when 50% of all products were this type.
This healthy pipeline of activity is set against another base rate increase, the ongoing energy crisis and the post-furlough job market. All of which will all play a part in activity trends.
Industry collaboration and tech innovation will be key to ensuring the industry has the tools to process the high levels of activity and ensure all borrowers can secure the right deal for them. This year, LMS will drive the first fully automated remortgage case processed from offer to completion as the last two years have forced the industry to reimagine what’s achievable and collaborate to provide a more secure and efficient service. We will continue to innovate and grow to best service the market, and we look forward to seeing what will come next.”
