Remortgage market reawakens from slumber.By Tony Wornell
Back in 2007/8, the case load of the average mortgage intermediary included 30 to 35 remortgages per year, their largest single slice of business.
After the Bank Base Rate fell to an historic low in early 2009, many borrowers were content to move to their lender's SVR as the reversionary rates were so attractive. As lenders built their stocks of these so-called ‘free-to-go' borrowers, so the remortgage case load of the average mortgage intermediary fell, reaching around 20 cases a year by 2010 where it has remained pretty much ever since.
But there are indications that things are changing. Recently, one lender asked BDRC to look at their SVR redemptions, which had started to pull ahead of forecast levels despite no change in pay rates. What was going on?
In most cases, the lost SVR borrowers had remortgaged away to fixed rate deals elsewhere. These borrowers had woken up to the falling cost of new fixed rate deals and decided to act. It took them some time, though.
Some claimed they had only just been released from their last fixed rate deal, whereas the lender's data made clear that they had been on SVR for at least six months and in some cases over a year. And even after they woke up to better deals, it typically took three months or more to complete their remortgage.
If it is possible to generalise from this example (and it is a big if), then a change point has been passed. The inertia of free-to-go borrowers is finally melting away in the sunshine of lower fixed rate deals.
Because of the lead time to action, however, it will take quite some while for most of the free-to-go to get up and go. But there are signs that better times are coming for mortgage intermediaries, along with tougher times for lenders' retention teams.