For anyone and everyone who has worked in and around the mortgage market for any length of time, the word remortgage tends to be one which screams opportunity, especially in such a competitive lending environment. However, for many consumers sitting outside of this mortgage bubble, it’s a word which can prove tricky to understand and to fully appreciate the potential financial benefits due to some perceived complexity.
In that respect, this is a sector which continues to be held back by a few factors. Lack of knowledge, homeowners sticking with who/what they know and then there are those who continue to adopt a ‘wait and see’ attitude in search of that all-elusive perfect time to act. Which, in reality, is often too late.
These contributing factors were evident in a recent study from Barclays which highlighted that nearly 49% of British homeowners have never investigated what other deals are on the market, even though a third (32%) know it could probably save them money. It also found that 28% of people don’t know what the standard variable rate (SVR) is, and that 45% aren’t clued up on what loan to value (LTV) means. This has resulted in homeowners relying on others for help and guidance on remortgaging, with 46% of people doing whatever their mortgage broker tells them, rather than fully understanding the terminology behind these decisions.
When it comes to those who do remortgage, the vast majority commonly switch to a fixed rate deal. 93% of customers who remortgaged in the first half of 2021 opting to lock in their rate for a fixed term. Two-year and five-year fixed terms were revealed to be the most popular term lengths, with 44% choosing a two-year fixed term and 44% opting for a five-year fixed term. Two-year fixed term deals were most popular with the under 30s, as 57% of this age group decided on a shorter term fixed rate period of two years. By contrast, homeowners aged 40-56 were most likely to commit to longer term five-year fixed rate deals, with 47% locking in their fixed monthly payment for this period.
It’s clear from our research that many find remortgaging a tricky subject to understand, which leads to the question – what more can intermediaries do to help deliver remortgage savings and bolster business levels.
What can you do now?
- Revisit your client database. Pinpoint clients currently sitting on an SVR and highlight those approaching the end of their fixed term
- Pro-actively contact them for a mortgage review where appropriate
- Outline just how much they could potentially save in pounds and pence per month by remortgaging
And in the future?
- Establish a manageable retention strategy for new and existing clients
- Don’t treat customers equally – target and identify the right audience and tailor your campaign/strategy accordingly
- Messaging – keep it simple. One measured, well-executed message a week is better than five poorly planned ones
These are very simplistic measures but, as with most things, the simplest of approaches can often prove to be the most effective.
Craig Calder is director of mortgages at Barclays