A greater proportion of remortgage applications resulted in lender offers in the third quarter of 2016, despite the fallout from the Brexit vote, according to the Intermediary Mortgage Lenders Association’s (IMLA) latest Mortgage Market Tracker.
The research found that 80% of remortgage applications resulted in an offer in Q3 2016 – up from 77% in Q2 2016. The proportion of offers that subsequently resulted in a completion also increased to 83% in Q3, from 77% in Q2.
As a result, 67% of remortgage applications completed in Q3: the highest percentage seen in any quarter since IMLA began tracking this at the start of the year.
The quarterly report – which uses data from BDRC Continental to examine intermediary sector activity – follows mortgage applicants’ journey through the approval process from their initial enquiry right the way through to completion. The tracker divides the results by firms dealing with first-time buyers (FTBs), homemovers, remortgagors, buy-to-let (BTL) borrowers and applicants for specialist loans.
The tracker also shows that firms experienced a significant jump in the number of remortgage enquiries they received in Q3. In Q2, intermediaries received an average of 38 enquiries, which increased to 48 in Q3 – a rise of 26%.
Lending figures for Q3 show that the remortgage market was in good health in the wake of the Brexit vote. According to data from the Council of Mortgage Lenders (CML), a total of £17.5bn was lent to homeowners for remortgaging in Q3 2016 – an increase of 4% on Q2’s £16.7bn. This is also the highest quarterly total since before the financial crisis.
Cheaper mortgage rates have contributed to the growth of remortgaging, by encouraging existing borrowers to switch to a more competitive deal, given there are no further rate cuts in the pipeline. According to the Bank of England’s latest effective interest rates data, average two-year, three-year and five-year mortgage rates all fell between September and October.
Borrowers’ progress through the intermediary channel, Q3 2016:
| All | FTBs | Movers | Remo. | BTL | Specialist | |
| Average number of enquiries | 46 | 52 | 40 | 48 | 43 | 45 |
| Initial enquiries to AIPs | 58% | 55% | 58% | 62% | 58% | 59% |
| AIPs to full applications | 70% | 66% | 73% | 74% | 71% | 66% |
| Applications to offers | 75% | 71% | 78% | 80% | 75% | 72% |
| Offers to completions | 74% | 69% | 76% | 83% | 73% | 72% |
| AIPs to completions | 39% | 32% | 44% | 50% | 38% | 34% |
| Applications to completions | 56% | 49% | 59% | 67% | 55% | 52% |
The tracker also reveals that the referendum result did not significantly affect the flow of customers through the mortgage approvals process. Between Q2 and Q3, there was a small decrease in the rate of borrowers whose initial enquiries resulted in agreement in principles (AIPs) from 59% to 58%. Furthermore, the rate of mortgage offers being completed fell marginally from 75% in Q2 to 74% in Q2.
However, intermediaries reported an average of 46 enquiries in Q3 – two more than the 44 average recorded in Q2, which suggests that appetite for borrowing continued to increase. Furthermore, the rate of completions per 100 applications remained unchanged between the two quarters, while the rate of completion per 100 agreement-in-principles and per 100 enquiries increased marginally.
Borrowers’ progress through the intermediary channel:
| Q2 2016 (all) | Q3 2016 (all) | Change | |
| Average number of enquiries | 44 | 46 | +2 |
| Initial enquiries to AIPs | 59% | 58% | -1% |
| AIPs to full applications | 67% | 70% | +3% |
| Applications to offers | 75% | 75% | 0% |
| Offers to completions | 75% | 74% | -1% |
| Completions per 100 enquiries | 22 | 23 | +1 |
| Completions per 100 AIPs | 38 | 39 | +1 |
| Completions per 100 applications | 56 | 56 | 0 |
The proportion of intermediaries who reported being ‘very confident’ in the mortgage industry’s outlook increased by six percentage points from 39% in Q2 to 45% in Q3. The proportion of brokers who reported being ‘very confident’ in the prospects for the intermediary sector and their own businesses dipped slightly however, with an increase in the number who reported being ‘fairly confident’. Overall, confidence remains lower than it was a year ago.
Intermediary confidence since Q1 2015 (%):
| Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | ||
| Mortgage industry outlook | Very confident | 57 | 55 | 61 | 61 | 42 | 39 | 45 |
| Fairly confident | 36 | 44 | 36 | 36 | 55 | 56 | 52 | |
| Confident (net) | 93 | 99 | 97 | 97 | 97 | 95 | 97 | |
| Intermediary sector outlook | Very confident | 71 | 71 | 67 | 65 | 51 | 54 | 50 |
| Fairly confident | 22 | 28 | 28 | 33 | 46 | 43 | 48 | |
| Confident (net) | 93 | 99 | 95 | 98 | 97 | 97 | 98 | |
| Own business outlook | Very confident | 69 | 76 | 78 | 77 | 59 | 60 | 59 |
| Fairly confident | 30 | 23 | 19 | 21 | 38 | 39 | 41 | |
| Confident (net) | 99 | 99 | 97 | 98 | 97 | 99 | 100 |
Peter Williams, executive director of IMLA, said: “IMLA’s latest tracker shows that conditions in the mortgage market were particularly good for remortgagors in Q3, with noticeable increases in the number of applications resulting in offers and subsequent completions. The low interest rates available to borrowers almost certainly contributed to this increase, with borrowers able to switch on to very attractive deals. Rates are unlikely to fall much further, given that they are priced against swap rates, but the sustained 0.25% base rate means they are also unlikely to rise – which should encourage further remortgage activity.
“After a dip in the run-up to the EU referendum in June, the number of overall enquiries increased in Q3, with would-be borrowers showing faith in the market. Despite macro-economic uncertainty and short-term volatility, there was only a slight dip in the proportion of enquiries progressing to an AIP – demonstrating that borrowers were keen to push on with their intentions. The rate of applications resulting in offers was also unchanged – suggesting that lenders were willing to meet demand.
“2016 has been a tumultuous year for the market, with the changes to Stamp Duty and the Brexit vote both affecting activity, and it is therefore unsurprising to see that intermediary confidence dipped slightly. However, the market has proved itself much more robust than many predicted it would be, and the industry is in a good place to continue this momentum in to 2017.”
