Remortgage market set to dramatically rise
2022 is being dubbed ‘the year of the remortgage’ by mortgage advisors due to the rapidly rising number of homeowners seeking remortgage deals.
And the rise is set to be even steeper as FCA news states there are currently 370,000 mortgage borrowers who are able to save money by switching mortgage deals, yet are still not doing so, prompting advice to advisors to keep their eyes well and truly focused on this potential market.
Rising interest rates
In an effort to quell runaway inflation, the Bank of England increased the base rate of interest by 50 points in August, to 1.75%, the highest jump in 27 years, with further increases predicted for the rest of the year.
The increase in interest rates affects approximately two million homeowners almost immediately, even before further rate rises. Coupled with the high rate of inflation, currently 9.9%, way above the 2% mark of a healthy economy, the remortgage market is seeing a surge in homeowners eager to secure the lowest monthly repayments available to them.
In recent times many lenders have pulled out of mortgage deals due to economic uncertainty. The base rate is 2.25% but many analysts are estimating that this could rise to 6% by spring-time next year. The impact of this will undoubtedly push many people, where they can get a new mortgage offer to remortgage their property as soon as possible and secure a fixed interest rate to mitigate the financial burden that 2023 could bring.
The squeeze for homeowners
While rising interest rate rises have clearly fuelled the demand for remortgages, the cost-of-living crisis and the rising cost of housing have also played their part. Inflation, high mortgage rates and record-high home prices are chipping away at housing affordability, making it particularly difficult for first-time buyers to enter the housing market, while existing homeowners face increased pressures on their monthly budget.
Whilst the Government have reduced Stamp Duty liabilities and for first-time buyers and homebuyers generally in their recent budget, may predict that the long-term impact of this will be to cause an even further increase in house prices.
Reported drop in average monthly payment amount
In the July report by LMS, figures show that average monthly mortgage payments dropped, with 54% of borrowers increasing their loan size. The average monthly payment went down to £226 in July, from £236 the previous month. The most popular reason given by respondents was to release equity into their property and 70% of those who remortgaged took out a five-year fixed rate product.
The average interest rate on a two-year fixed-rate mortgage now stands at 4.24%, the highest rate since January 2013 and a huge increase from December 2021, when it was 2.34%.
While there may be a drop in house sales, as pressure on household finances increase, clearly there is likely to be no let up in house owners needing to lock in favourable rates, meaning the conveyancing market is set to remain buoyant with this increased need for remortgages.
Two-year fixed deals may overtake five-year fixed
And while the five-year fixed rate deals are currently the most popular, some predict that the two-year deals will overtake, due to the anticipation that rates will, at some point in the future, eventually come down.
Plus, with the swiftly-changing financial position for many homeowners, mortgage advisors could well highlight the two-year, shorter-term deal as most beneficial for remaining flexible to circumstances, as well as being a means of keeping the remortgage ‘churn’ continuously high.
Help to cope with the remortgage demand
The LMS has said that coping with this demand “will be vital for the industry” and that “borrowers, lenders and law firms… must collaborate to put appropriate solutions in place”.
Remortgage transactions often require a faster turnover than standard mortgage transactions, as borrowers want to move quickly to secure the currently ever-increasing rates. Borrowers can also secure deals in advance, by three or six months, but the speed of the transaction is still vital as availability of these deals reduces.
We’ll help with faster timescales
To speed up your clients’ remortgages, we offer a range of products suitable, specifically, for remortgage transactions.
Policies, such as a ‘No search Lender’, and other lender-specific policies all empower you to complete on your client’s remortgage transaction, smoother and faster. Our pricing is highly competitive with the ease of use of our consumer-friendly portal.
Policies are available now
We’re able to quote a premium in seconds and issue policies in minutes, meaning what would otherwise be a time-consuming transaction is rapidly taken care of.
You can view our full range of conveyancing indemnity products here. Alternatively, get in touch on 0800 524 4235 to speak to us directly about how we can help you with faster conveyancing, or email us at info@prosperityinsurance.co.uk.
