Speaking at the Mortgage Next conference, Jonathan Buckle, national manager for Halifax Intermediaries, believed the share of the mortgage market taken up by remortgaging could drop from a projected 32 per cent this year to 15 per cent by 2011.
He cited the retention fees and the move towards longer-term deals by lenders and consumers as the main catalysts for the change.
Buckle said: “Customers are looking at longer-term deals as they don’t want the hassle of remortgaging every two years and churning two-year fixed rates is not viable for lenders. Also, with less people on standard variable rates, lenders need to maintain their profits so there will be less cheap deals in future.”
Linda Will, managing director of Accord Mortgages, agreed, but believed the biggest impact could be felt by securitising lenders.
“There is no doubt if retention takes off and it competes with new business products, the remortgage market could half. However, it will be interesting to see how people who can’t offer retention products will compete. If they have no intention of wanting to keep the client over the longer-term, they will have to compete on product pricing or, potentially, proc fees.”
However, Rachel Bancroft, managing director of KGB Packaging, believed customers would not want to be tied into longer-term deals.
“New entrants to the market pricing deals more and more competitively mean that client’s options are extensive. This, coupled with far better financial education for clients, I believe, would make many shy away from long-term fixes.
“I speak here with some degree of experience having entered into a 10-year fixed back in about 1998 and having paid heavy redemptions to get out of the mortgage when interest rates began to dive. What had seemed an attractive proposition became a very expensive one.”
