If 2021 was the year of property purchase, 2022 looks set be to the year of the remortgage. UK Finance says that there were £218bn worth of mortgages written for purchases in 2021 but expects this number to fall to £174bn this year. On the other hand, remortgaging accounted for £89bn worth of business last year and is expected to grow to £96bn in 2022.
It’s clearly good news for mortgage advisers, but there’s no guarantee that this wave of remortgages will be crashing through your door. How much of this potential business will be swallowed up by product transfers? How many of your customers will sleepwalk into a new rate offered by their existing lender? Without taking the opportunity to use the expiration of their current mortgage deal to review their overall financial picture and make a more considered decision.
When faced with an opportunity like this, proactivity is key for advisers. For the vast majority of customers, a mortgage will be their most important financial product. A mortgage renewal presents an excellent opportunity to review their financial circumstances and objectives. This can’t be achieved by simply switching to a new rate with a product transfer.
Now is the time to talk to your customers about their plans for the coming years. Do they want to make home improvements, for example, or are they considering investing in Buy to Let? If they have a requirement for cash in the future, capital raising with their remortgage now could prove an economically efficient way for them to reach their objectives, particularly given that we are in a rising rate environment.
For those customers with outstanding unsecured debt, find out their appetite to clear that debt and whether they could benefit from a capital raising mortgage for debt consolidation. Converting unsecured debt to a secured mortgage will not be the right option for all customers, but it will certainly benefit some, enabling them to pay down the debt and lower their monthly outgoings.
At Pepper Money, we allow capital raising up to maximum LTVs on our remortgage products, and that capital can be used for any purpose, including debt consolidation. The increased use of AVMs also means that getting to an offer stage for a remortgage can be quick and convenient for a customer.. For example, we recently issued an offer within 24 hours of receiving the application.
So, don’t let your customers miss the opportunity to review their finances in 2022. Make sure you make the most of the year of the remortgage.
Paul Adams is sales director at Pepper Money