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Based on the fact that remortgaging related sales have been high recently, a new report from Paragon Bank found that mortgage brokers expect remortgage activity to drive business over the next year.
According to the Mortgage Intermediary Insight Report from Paragon, 74 percent of intermediaries think that residential remortgage activity will be a key driver of business in the next 12 months. This is followed by buy-to-let remortgages, which are thought to be important by 56 percent of intermediaries.
Other sources of future business include buy-to-let purchases (44%) and first-time buyers (43%). (33 percent ). At the same time, many people chose later life lending (33%) and equity release (21%).
Remortgaging made popular
The report said that remortgaging has become more popular in the buy-to-let market this year. This is because this year marks five years since changes to mortgage underwriting rules helped five-year fixed rate mortgages become more popular.
According to the online lending platform Freedom Finance, the number of remortgage sales in Q4 2021 (92,558) was the highest it had been since Q1 2020, before the pandemic hit. This was also the first time since Q3 2020 that remortgage sales outnumbered all other types of home loans.
The pandemic impact
In contrast, sales of mortgages for first-time buyers (112,000) and house-movers (133,890) both hit a five-year high in the second quarter of 2021, but then dropped to 89,542 and 75,726 in the fourth quarter.
Freedom Finance noticed that the number of these mortgages had gone through the roof during the pandemic. This was because people took advantage of the stamp duty holiday, put more money down on their homes, and changed their lifestyles to get on the property ladder or move on.
It also said that this shows that the trend from “move” to “improve” is still going strong as people prepare for a worsening economy as the cost-of-living crisis hits and the Bank of England starts to raise interest rates in December 2021.
As part of the Paragon research, brokers were also asked what, if any, changes they have made to adapt to this shift toward the remortgage business.
Brokers’ Remortgaging approach
Just over four in ten intermediaries (41%) said that they are putting more emphasis on client communication toward the end of the mortgage term. On average, brokers start communicating with borrowers 4.5 months before the end of the mortgage term.
Another one in ten firms (11%) said they had streamlined their compliance procedures, and just over one in twenty (6%) said they had hired dedicated advisers to handle remortgage business.
Brokers also gave information about how clients behave when it comes to remortgaging. They said that just over half (52 percent) of borrowers would switch to a new lender when their current loan comes to an end.
When brokers were asked what they thought their clients’ top priorities were when deciding to remortgage, 91 percent, 63 percent, and 45 percent said the product rate, the product fees, and the ease of the process were most important to them.
Improving maturity and Remortgaging process
Richard Rowntree, who is pictured, is the managing director for mortgages at Paragon Bank. He said that five-year fixed rate mortgages became more popular with borrowers in 2017 because of new underwriting standards.
“Since many of these loans are now coming due, we knew and planned for a rise in remortgaging. It’s interesting to see that our intermediary partners have learned from our mistakes and are taking steps to adapt to this change in the way business is done, he said.
“It’s no surprise that rates and fees are the most important things for borrowers to consider when remortgaging, but we also see that ease, speed, and service are also important. This shows how important it is for the industry to improve the maturity and remortgage process for customers.
“The gloomy economy and the Bank of England’s consecutive rate hikes are likely to increase demand in the remortgage market,” said Andrew Fisher, chief commercial officer at Freedom Finance. “This is because borrowers want to switch from variable-rate mortgages to fixed-rate loans or because their current deals are coming to an end.”
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