So, that was the first six months of 2022. How was it for you?
I’m pretty sure that, like me, you are looking at the last six months and thinking, “Well I wasn’t expecting that”. From a global perspective, to our economy, to our own mortgage market, I’m thinking that very few people would have been able to predict exactly how this half-year has played out.
The war in Ukraine, the energy crisis, inflation and the cost of living rises, multiple increases in Bank Base Rate, product rates on an upward progression beyond this, Right to Buy for housing association tenants, ‘Benefits for Bricks’, a new review into the mortgage market, I could go on. If you anticipated even one of these, then you’re something akin to a modern-day Nostradamus.
But, what specifically of our market? Back at the start of the year there was every anticipation that this would be the ‘year of the remortgage’. Purchase activity was believed to be on the slide and it would be remortgaging which would define exactly what sort of year this was going to be, particularly for advisers.
Six months in, has this been the ‘year of the remortgage’? It has certainly been strong, but I think many will have been surprised by just how equally strong purchasing has remained, fuelled still by buoyant demand and a shortage of supply, which has translated into quick sales and rising house prices.
Will this be sustained throughout the rest of the year? I think it’s already clear that a large number of factors listed above – added to which we still have low levels of supply of new-build and general supply of homes coming to market – means that the purchase activity we have been witnessed over the last six months will begin to tail off.
Recent figures from UK Finance for the first three months of the year, showed a 42% drop in the number of people moving home, compared to the same period last year, while the number of first-time buyers was down by 12%.
Now, you might rightly point out that this is not really an ‘apples with apples’ comparison because Q1 2021 was a period when activity was strong because, at the time, we believed the end of the stamp duty holiday was going to be in March. When that was pushed back to September, it resulted in another flurry of activity.
And, if you compare Q1 2022 with Q1 2019 – the last ‘normal’ year – then we are still up on that three-month period three years ago. So, the signs are still positive, but as mentioned, even with the recent announcement by the Bank/FPC that it is not going to require lenders to have the 3% interest rate stress test anymore, I suspect the cost of living/affordability pressures, etc, will impact on demand for purchasing and therefore lending, which will begin to be much more evident from now on.
Which leads us back to the ‘year of the remortgage’ prediction? How about a shift? The ‘half-year of the remortgage’? Certainly, the rise in BBR, the rise in product rates, is making existing borrowers think incredibly hard about what they should do right now. Should they go for a longer-term fix in order to ride out future rate rises, which I’m afraid, do look baked in for at least the next year or so?
It would seem that many borrowers are answering yes to this, even if there may be a call to try and ride out this high inflation period, wait for rates to stabilise, and see what is available 12/18 months from now. However, for those coming to the end of their deals in the months ahead, they will need to remortgage, even if the likelihood is that they will be paying more for their mortgage finance.
There is a significant level of business coming up for maturity right now, and over the next six months, and if the choice is between a lender SVR or remortgage then I know which one advisers will be pushing for. And of course for advisers it is not just the remortgage itself which provides an attractive business opportunity, but everything else that ‘floats’ around it, particularly protection and GI needs in this new economic environment, and of course conveyancing.
You’ll be acutely aware of what is happening in the conveyancing space in terms of turn-around/completion times, service levels and resources, so would you want to place your client in a ‘free legal’ space, where the risk is that much greater? Who wants to be telling their client they’ve missed out on the product you recommended because of delays through free legals?
Instead, there are plenty of cashback remortgage deals that can be used for their own conveyancer, who will work for them not just the lender. Advisers can also earn referral fees with Broker Conveyancing of up to £300 where the legal fee is £600 and that gets paid a week after completion. Again, it is good business for you but also gives your client the very best chance of completing within the desired timescale.
Overall, while the first half of the year could not have been predicted, the next six months may well have a more familiar feel, and if remortgaging is going to provide the bulk of your business, make sure you prepare for this and make the most of it.
Mark Snape is chief executive officer of Broker Conveyancing