More home owners in the UK were successful with remortgage applications in the third quarter of 2016 despite the fallout from Brexit as the outlook for the market remains confident.
Indeed, the latest quarterly report from the Intermediary Mortgage Lenders Association (IMLA) says that the outlook from a consumer point of view is very good with a growing number of intermediaries confident about the future.
Overall the proportion of remortgage applications resulting in an offer increased to 80%, up from 77% in the second quarter of the year and the number of remortgage offers resulting in a completion increased to 83% from 77%.
As a result, some 67% of remortgage applications completed in the third quarter, the highest percentage seen in any quarter since the IMLA began tracking this at the start of the year.
The tracker also shows that firms experienced a significant jump in the number of remortgage enquiries they received, an average of 48 compared with 38 in the second quarter of the year, a rise of 26%.
The report suggests that cheaper mortgage rates have contributed to the growth of remortgaging by encouraging existing borrowers to switch to a more competitive deal, given there are no further rate cuts in the pipeline. According to the Bank of England’s latest effective interest rates data, average two year, three year and five year mortgage rates all fell between September and October.
The tracker also reveals that the referendum result did not significantly affect the flow of customers through the mortgage approvals process. Between the second and third quarters there was a small decrease in the rate of borrowers whose initial enquiries resulted in agreement in principles from 59% to 58%. Furthermore, the rate of mortgage offers being completed fell marginally from 75% to 74%.
The proportion of intermediaries who reported being ‘very confident’ in the mortgage industry’s outlook increased from 39% in the second quarter to 45% in the third quarter. However, the proportion who reported being ‘very confident’ in the prospects for the intermediary sector and their own businesses dipped slightly but there was an increase in the number who reported being ‘fairly confident’.
‘Conditions in the mortgage market were particularly good for remortgagors in the third quarter with noticeable increases in the number of applications resulting in offers and subsequent completions,’ said Peter Williams, IMLA executive director.
‘The low interest rates available to borrowers almost certainly contributed to this increase, with borrowers able to switch on to very attractive deals. Rates are unlikely to fall much further, given that they are priced against swap rates, but the sustained 0.25% base rate means they are also unlikely to rise which should encourage further remortgage activity,’ he explained.
He also pointed out that after a dip in the run-up to the EU referendum in June, the number of overall enquiries increased in the third quarter which suggests that would-be borrowers are showing faith in the market.
‘Despite macro-economic uncertainty and short term volatility, there was only a slight dip in the proportion of enquiries progressing to an AIP, demonstrating that borrowers were keen to push on with their intentions. The rate of applications resulting in offers was also unchanged suggesting that lenders were willing to meet demand,’ he added.
‘It has been a tumultuous year for the market, with the changes to stamp duty and the Brexit vote both affecting activity, and it is therefore unsurprising to see that intermediary confidence dipped slightly. However, the market has proved itself much more robust than many predicted it would be, and the industry is in a good place to continue this momentum in to 2017,’ he concluded.
