As we know our market works in cycles. For instance, at the start of the year when many commentators were looking at 2022 as ‘the year of the remortgage’ this wasn’t simply predicated on a belief that – post-stamp duty holiday – purchases would drop off and remortgaging would once again become the foundation of the market.
Of course, this could have had something to do with it, although I’m not so sure we’ve seen the major fall in purchase transactions that many were anticipating. I know that our purchase instruction levels have held up very well, plus talk to either agents or advisers and they will tell you that purchase demand remains strong and it is not taking long for properties to sell.
However, what the ‘year of the remortgage’ folk were also talking about was the cyclical nature of the mortgage market and what this means for both 2022 and 2023. Think back, if you can, to 2017 – it does seem a very long time ago and much water has clearly flowed under the bridge – but it was notable for being something of a decent year for the overall mortgage market.
Indeed, there were a number of points during that year when the market was running very hot plus there were numerous political discussions – notably Brexit – that meant many borrowers were looking to ‘hedge their bets’ and take out longer-term fixes in order to give them mortgage payment certainty.
You might well justifiably argue that every year since has seen something similar – hence the rise in, for example, five-year fixes. However, back in 2017 that was certainly a conversation that many advisers and their borrower clients were having and there was a significant amount of five-year business written.
Fast-forward to now and of course, many of those five-year deals are coming up to a point of renewal. Advisers will be contacting existing clients to help them work through the current remortgage market and hence we will see those borrowers remortgaging or product transferring.
At the same time, we have the current market/economic/interest rate environment to get to grips with, and again that is understandably providing plenty for existing borrowers to get their heads around. Especially if they are sitting on their lender’s SVR which is likely to have gone up lately, and they are able to remortgage in order to hedge against any further movements, which we must think are likely.
The other point to make here is around the period we have all gone through over the past few years, and what this has meant for property values, and what homeowners might be wishing to do as a result of increases.
Again, if there is a need for money and equity has increased, borrowers might want to use the opportunity right now to access this, and to secure a longer term fixed rate, especially if they believe product rates will continue to rise over the course of the year.
What I am essentially getting at here is that I would anticipate a very strong remortgage market to be with us right now and to run right through this year and well into 2023. This is being brought about by a combination of those factors mentioned above – the simple fact that many borrowers are coming up to maturity, added to a growing want and need to tie down mortgage costs over the next two/three/five years in order to ride out what many might consider to be a bumpy interest rate ride.
Add these factors together and you might see why there is a significant amount of remortgage business available right now, and why there is a significant amount going through conveyancers. And yes, that can present some significant challenges, not least because not all conveyancers are the same.
I read daily, for instance, about the issues many advisers and their clients are having with their conveyancing, particularly in terms of free legals, and my immediate response is to please ensure you are not putting your clients into this very busy pool where the ‘lifeguard’ resources are not what firms would wish.
There has been a number of articles recently about current adviser ‘bugbears’ and free legals always crops up, with plenty of frustration voiced about the service and the length of time it takes.
My point here is that remortgage business is unlikely to fall back anytime soon – clearly, you wouldn’t want that anyway. But when there are cashback and other options available for your client’s remortgage conveyancing needs, don’t feel that you have to go along with a client who may be blinded by the free element of free legals.
Explain the benefits for everyone in not opting for this and make sure you can keep your remortgage clients not just happy with the mortgage you have secured them, but also happy in the time it takes them to get this done.
Mark Snape is chief executive officer of Broker Conveyancing