Experts delve into rising activity
Knight Frank Finance reported a 41% jump in the value of new remortgages it wrote over May and June compared with the previous two months.
Alongside this data, an estimated 800,000 fixed mortgages will expire before the end of this year, with a further 1.6 million coming to an end in 2024, according to figures from UK Finance.
So what does this mean for the remortgage market? Mortgage Introducer spoke to experts about the rise in activity, broker support and their advice for customers.
Rising remortgage activity
The spike in remortgaging activity, Jonathan Stinton (pictured), head of intermediary relationships at Coventry for Intermediaries, said, is the result of tens of thousands of two- and five-year deals now coming to an end.
“There is more than £132 billion worth of residential mortgages and a further £19.6 billion of buy-to-let mortgages maturing in the latter half of 2023 alone,” he explained.
Stinton said borrowers are simply remortgaging now to avoid falling on to their lender’s standard variable rate. However, with the Bank of England making consecutive interest rate rises in recent months, he added that some borrowers are also making the decision to remortgage early.
“This is because they want to lock into the best rates available now, before another rise in the base rate that could further increase their mortgage payments,” he said.
While some customers may look to remortgage as they come to the end of their mortgage term, Clare Beardmore, director of Legal & General Mortgage Club, agreed that others will be considering their options at an earlier point as a result of consecutive base rate rises and volatility in the market.
“At Legal & Mortgage Club, we are beginning to see increased levels of refinance activity; indeed, it formed 40% of all business completed in June,” she said.
Conor Murphy, chief executive and founder of Smartr365 and Capricorn Financial Consultancy, added that, for many, remortgaging early, or locking in options which they may drawdown on later, will make financial sense.
Broker support
Murphy said the value of financial advice has likely never been clearer than it is today with market conditions continuously changing. Borrowers’ needs and circumstances vary massively, and Murphy believes that advisers have an important role in guiding them towards a suitable route to homeownership.
Beardmore concurred with Murphy’s standpoint and said it is advantageous to speak to advisers for many reasons.
“For one, they may have access to exclusive products that would not be available through consumer comparison websites,” she said.
Furthermore, Beardmore added that advisers also have the expertise and deep knowledge necessary to consider the whole picture, including any Early Repayment Charges (ERCs) that need to be paid, and whether there are some alternative options, such as extending the mortgage term or converting to an interest-only product.
Above all, she said an adviser can settle a client’s concerns, especially if they are worried about current market rates and are considering their options early.
Advice for clients
Murphy said for borrowers nearing the end of their product term, he would advise them to lock into the best current option and continually review it right through to drawdown.
“If rates then move in the borrower’s favour, they can opt for the newer, better option,” he added.
Meanwhile, Stinton said for clients nearing the end of their term, the key question to consider is whether to remortgage or to opt for a product transfer.
“Both routes have their benefits; remortgaging offers clients a greater range of products than those offered by a single lender, potentially opening up lower rates,” he said.
However, for clients whose financial circumstances might have changed significantly in the last few years, Stinton added that a product transfer could be a more suitable choice, as no affordability checks are required.
Making the right decision ultimately depends on the client’s circumstances, which is where Stinton believes brokers add real value.
Have you seen rising demand for remortgages at present? Let us know in the comment section below.
