Homemovers had the highest success rate for turning mortgage applications into completions during the first quarter of 2016, according to the latest Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA).
The tracker shows 80% of homemover applications resulted in an offer and 80% of offers led to a completed deal.
The tracker – using data from BDRC Continental – examines applicants’ journey through the intermediary channel from their initial mortgage enquiry through to completion. The first quarter of edition splits out the results by firms dealing with first-time buyers, homemovers, remortgagers, buy-to-let borrowers and applicants for specialist loans.
It shows intermediaries dealt with an average of 49 new enquiries, with those focused on first time buyers and homemover segments being kept busiest (55) followed by those doing buy-to-let business (52).
Overall, 55% of enquiries in first quarter of progressed to an agreement in principle (AIP), with the highest rate reported by intermediaries dealing with remortgages and specialist loans (59%). Those focused on first time buyers saw the fewest initial enquiries (51%) progress any further.
IMLA explained that this is likely to be influenced by a number of factors, including: affordability constraints; some aspiring borrowers making initial enquiries without looking to progress immediately; and others shopping around and exploring their options via multiple firms or channels.
Both 2014 and 2015 saw first time buyer activity make a slower start to the year than homemover and remortgage activity, before registering the fastest growth of all three segments from the first quarter to the second.
IMLA said its data therefore highlights the potential for further growth in first time buyer activity this year, with demand continuing and first time buyer loans via intermediaries already up 15% year-on-year in first quarter of.
Overall, 69% of AIPs in the first quarter of progressed to an application, rising to 72% among firms handling homemover and remortgage cases. These higher rates may be a sign of these borrowers having a firmer idea of their needs and an immediate wish to progress, IMLA said.
76% of applications received an offer, and 76% of offers resulted in a completion. In each case, intermediaries dealing with homemover cases reported the highest conversion rates (80%).
Comparing types of firm, members of Appointed Representative (AR) firms reported a 78% progress rate at both stages, compared with 73% among Directly Authorised (DA) businesses.
According to brokers, lender decisions to decline an application in first quarter of accounted for 28% of drop-outs between AIP and completion stage, notwithstanding the option for those affected to keep progressing their application via another lender.
72% of drop-outs occurred for reasons other than lender declines. Intermediaries dealing with first-time buyers reported a lower rate of lender declines (29%) than those dealing with homemovers (31%) or applicants for specialist loans (33%).
The tracker also looks at business confidence among intermediary firms in the first quarter of 2016. While IMLA found that the overwhelming majority remain confident about the future outlook, the data suggests a greater level of caution than at any point in the previous 12 months with more brokers reporting they are ‘fairly’ rather than ‘very’ confident.
Peter Williams, executive director of IMLA, said: “Using an intermediary has become ever more established as the most common way to access mortgage finance in the UK. After a busy start to the year, this data suggests that homemovers, in particular, have taken advantage of strong competition between lenders and a fast expanding range of competitive products.
“The first time buyer market typically picks up pace in Q2, although April’s stamp duty reforms have clearly disrupted normal patterns and will have a lingering effect on the supply of property. Credit conditions are just one of many factors impacting first time buyers’ journey from enquiry to completion, and the EU referendum adds another unknown into the mix for Q2 which won’t go unnoticed in terms of intermediary confidence and consumer behaviour.
“In the meantime, despite the rush to beat the stamp duty reforms, our analysis also suggests there was no opening of the floodgates for buy-to-let mortgages, with the progress of buy-to-let applications remaining broadly in line with market norms. This suggests that standards of borrower assessment have held up well, despite the pressure of extra demand.
“As the new index develops, we will be able to track how these flows fluctuate over time and gain insights into how efficient and effective the mortgage process is.”
