LMS launches its 2021/2022 Snapshot of Remortgage activity

Today (16 February) LMS launches its 2021/2022 Snapshot of Remortgage activity for 2021, revealing trends in the context of an unparallelled year.

2021 activity:
  • Instructions: Increased through the year as borrowers shopped around for a better deal
  • Completions: Increased as industry capacity grew
  • Cancellation rate:Decreased throughout the year as the market stabilised
  • Pipeline:Increased through 2021 as remortgage activity picked up and cancellations fell
Key statistics:
  • £225 – average monthly payment decrease for those who remortgaged in 2021
  • 49% of borrowers increase their loan size in 2021
  • 52% of those who remortgaged in 2021 took out a 5-year fixed rate product, the most popular product in 2021
  • 30% the most popular aim when remortgaging was to release equity in property
Nick Chadbourne, CEO at LMS, comments on activity steadily increased:

“Remortgage activity picked up the pace in 2021, with a steady increase in both instruction and completion volumes after the Stamp Duty Land Tax holiday extension was announced in March. The extension took pressure off the purchase market and gave the industry more time to focus on remortgaging.

“High levels of instructions and completions volumes continued to build throughout the year, with pipelines reaching a peak in Q4 in the lead up to a peak in ERC expiries on 31st December 2021.”

…on loan sizes rise and fall as borrower confidence changes:

“Loan sizes were impacted by an array of factors through 2021. At the start of the year, we saw a rise in borrowers looking to increase their loan size as confidence was buoyed by economic recovery and better than expected unemployment rates.

“Numerous businesses also made the permanent decision around hybrid working which fuelled many homeowners to find the right space. Some made the decision to move, adding further pressure to the purchase market and increasing prices. For those homeowners who decided to stay put, many invested into their properties to make home working more palatable and enjoyed the rising house prices as a means of releasing equity.

“However, this optimism turned in the final quarter as consumer confidence waned due to rising inflation and increasing interest rates. Rates will continue to rise in 2022 and lenders will change their pricing strategies, making it even more essential for borrowers to shop around to find the right deal. This, paired with such large volumes of ERCs in the second half of the year, will create a very busy remortgage market.”

…on Bank of England base rate rise increased popularity of longer fixed-rate products:

“Low interest rates dominated the headlines in H2 2021, and this is reflected in fixed term product purchasing habits. 5-year fixes continue to be most popular product, but we did see a short-lived spike in the popularity of 2-year fixes in Q3 as borrowers were tempted by the record-breaking low interest rates for these deals. 

“However, as rumours of a Bank of England base rate gained momentum in Q4, borrower purchasing habits reflected scepticism over the longevity of low rates and longer-term fixed rate products widened the lead once more. As rates continue to rise through 2022, the move away from 2-year rates will continue.”

2022 predictions:
  • Busy remortgage market driven by 2-year and 5-year product expiries
  • Bank rate increase, energy crisis and post-furlough jobs will all play a part in activity trends
  • Industry collaboration and tech innovation will be key to success
  • LMS will lead first fully automated remortgage
Nick Chadbourne concluded:

“Looking ahead to 2022, we will see the first effects of two major product purchasing events. Two- year fixes taken out when the property market reopened in 2020 will begin to expire, along with 5-year fixes which were taken out in 2017, when 50% of all products were this type.

“This healthy pipeline of activity is set against another base rate increase, the ongoing energy crisis and the post-furlough job market. All of which will all play a part in activity trends. 

“Industry collaboration and tech innovation will be key to ensuring the industry has the tools to process the high levels of activity and ensure all borrowers can secure the right deal for them. This year, LMS will drive the first fully automated remortgage case processed from offer to completion as the last two years have forced the industry to reimagine what’s achievable and collaborate to provide a more secure and efficient service. We will continue to innovate and grow to best service the market, and we look forward to seeing what will come next.”

 

Kindly shared by LMS

Main photo courtesy of Pixabay