Remortgage instructions increased by 35% in October
LMS’s latest Monthly Remortgage Snapshot shows growth in market activity through October 2021, whereas mortgage approvals have declined according to the Bank of England.
The LMS report reveals that remortgage instructions increased by 35% in October with 47% of borrowers taking out a 5-year fixed rate product, the most popular product in October.
The average monthly payment decrease for those who remortgaged in October was £219, with 28% of borrowers citing their primary aim for remortgaging was to lower monthly payments.
Changes to overall loan sizes saw 44% of borrowers increasing their total loan size by an average of £21,963 post remortgage.
Nick Chadbourne, CEO, LMS commented:
“Despite the Bank of England’s decision to maintain the base rate at 0.1%, our research shows that two thirds (67%) of people expect interest rates to rise within the next year. This, paired with the increase in product rates which came as lenders pre-empted a possible rise, could be part of what fuelled the surge in instructions cases in October, as many borrowers shopped around to lock in the best rate available.
The number of remortgage completions continue to climb for the second consecutive month due, in part, to the high volume of fixed rate mortgages which expired at the end of September. It’s a promising sign to see the industry efficiently progressing the high levels of pipeline activity.
Purchase pipelines remain high, and the ending of the stamp duty holiday failed to dampen demand in the home mover market. This, combined with the high levels of ERC expiries due on December 31st and the continued buzz surrounding interest rates, should contribute to busy few months. Those in the industry should ready themselves for this increased activity.”
Latest data from the Bank of England’s mortgage approval figures show that mortgage approvals declined in October however, reaching 67,000 against 71,851 in the previous month. But figures still remain above pre-Covid averages for 2018 (65,049) and 2019 (65,715) and are only marginally lower than the five-year monthly average of 68,759 (Since October 2016).
Director of Henry Dannell, Geoff Garrett, commented:
“A significant drop in mortgage approval levels may seem like cause for concern but it’s important to view this movement within the context of the recent market landscape. The temptation of a stamp duty saving spurred many homebuyers to enter the market earlier than they may have otherwise and so a decline following the final deadline was only to be expected.
However, the level of mortgage approvals seen in October actually remains marginally higher than the annual levels seen pre-Covid in both 2019 and 2018 and so what we’re seeing is a return to normality rather than an exodus of buyer activity.”
Managing Director of Sirius Property Finance, Nicholas Christofi, commented:
“The combination of a stamp duty holiday wind down and, more recently, premature fears around an increase in interest rates, were both widely predicted to dent mortgage approval levels towards the back end of this year. So today’s figures will come as no surprise to anyone.
They certainly aren’t a reason to panic and mortgage approval levels in October are only marginally lower than the monthly average seen over the last five years. While an increase in rates is likely to materialise early next year, the cost of borrowing will remain very low and so we don’t anticipate any significant drop in buyer demand as a result.”