Conveyancing solutions provider LMS has published its latest weekly update, tracking remortgage market performance through the Covid-19 crisis.
The update includes LMS’ proprietary data on remortgage instructions, completions, cancellations and pipeline activity.
In this update, the ‘first’ and ‘second’ weeks of May refer to the weeks commencing 27 April (27.04 – 01.05) and 4 May (04.05 – 07.05) respectively. No data was collected for the bank holiday on 8 May.
Instruction volumes dropped by 25.6% between the first and second weeks of May, largely as a result of one fewer trading days due to the VE Day Bank Holiday in the week commencing 4 May. Had there not been a Bank Holiday, and instead, Friday the 8 May ran at average daily volumes for the rest of that week, the disparity would have been much smaller (-7.3%).
Instruction volumes across all areas remain flat following previously reported stepped drops, and current performance is broadly in line with the levels we saw for much of April.
Following a significant spike at the end of the previous week, 1 May brought a 63.7% increase in completions from the first working day of April – there was a slight drop in completions, week-on-week between the first and second weeks of May.
However, there were still 57.4% more completions in the week commencing 4 May than in the week commencing 6 April, both the second weeks of the month, which LMS says indicates that the normal start-of-month completions surge has continued longer into May, than in previous months. Overall, LMS is seeing that completions are consistently running ahead of both March and April 2020, and that May 2020 volumes are ahead of May 2019.
Continued strong performance in terms of completions, coupled with a rise in cancellations and a slightly decreased rate of instructions, means the pipeline has continued its recent contraction. Compared with the same point in 2019, remortgage pipeline cases are down 10%.
LMS belies that positives can be taken here from the work the market has done to process the more complex cases during lockdown. To some extent, pipeline growth in the early weeks of the crisis stemmed from a slowdown in the market’s ability to handle the more intricate cases, which were then carried forward and remained in the pipeline for longer. LMS is therefore seeing the average age of pipeline cases continue to grow.
In the week commencing 4 May cancellations reached the highest level since the beginning of the lockdown period, with 23.4% more cancelled transactions than in the next closest period, the week commencing 20 April. The cancellation rate so far in May stands at 4.04%, but recent trends showing up to 50% more cancellations than seasonal averages will likely cause this to increase.
Nick Chadbourne (pictured), CEO of LMS, said: “The remortgage market continued its strong start to May with a prolonged surge in completion volumes, which is testament to the industry’s hard work in developing and investing in the processes required to handle non-standard and complex cases, under remote working conditions.
“We have seen a dip in the volume of instructions, though this could be attributed to the VE Day Bank Holiday on the second Friday in May, without which levels would have remained broadly on a par with what we have experienced throughout lockdown.
“Wednesday’s announcement that the housing market can reopen will likely have a sizeable impact on the remortgage sector. In the wider housing sector, we’ve already seen that online demand has increased for buyers. With changes in the economy impacting personal finances, including access to mortgages, we may see an increase in haggling through the sales process.
“We expect to see a release of pent up remortgage demand in the coming weeks, but it will take time to work through the backlog. Tens of thousands of applications awaiting a physical valuation across both the purchase and remortgage markets can now be progressed as physical surveys resume, and higher value LTV products which had been stuck at the underwriting stage can proceed.”