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Remortgage activity at ‘new normal’ after social gathering rules

Rental Property

Remortgage instructions have fallen by 20% since the government unveiled its restrictions on social gatherings in mid-March.

Since then volumes have been fairly steady at a lower level.

Tighter lending criteria, consumer income reduction & unemployment, and loss of all physical contact are all having an impact.

The research comes from conveyancing solutions provider LMS, which is publishing a weekly update of remortgage activity during the crisis.

Nick Chadbourne, chief executive of LMS, said: “Despite the stepped drop in the middle of March, we are seeing healthy volumes entering the pipeline and existing remortgage business is continuing to be processed as usual. We can also cautiously predict a strong April, thanks to a peak in ERC expiries and a strong pipeline compared with the previous month.

“March 16th was a critical moment for lenders, with many removing +80% LTV products and limiting the progression of complex cases, delivering the drop in instructions we witnessed.

“The remortgage sector remains fully open for business, and as it refines processes and adapts to this new situation, capacity will only increase. We’re in uncharted waters to some extent, but knowing how the market is performing in real time could make a big difference for firms attempting to navigate their way through the crisis. As such, we’ll be sharing information on as many useful data points as we can.”

Completions dropped in the second half of March, in part reflective of the usual trend of numbers trailing off from the start to the end of the month.

However LMS said initial signs from April are very positive.

Volumes are 30% up month-on-month and are ahead of 2019 activity, largely down to a peak in ERC expiries, with 11% of all ERCs for 2020 coming in April.

Looking forwards, there appears to be some slowing of pipeline activity due to processing challenges such as access to redemptions statements, and the extension of funds request timelines by lenders to allow everyone to manage capacity.

LMS said it was reassured by the current level of activity, which demonstrates that the mortgage industry is finding solutions by handling cases remotely.

Mortgage restrictions are primarily impacting complex cases, with a reduced range of products available to this group.

As a result, to avoid ticking onto their lender’s SVR, some individuals will have to opt for an alternative solution, such as taking a payment holiday while the market rebalances

Over time, LMS said it expects restrictive criteria to loosen as lenders start to understand the risks and opportunities around AVMs (automated valuation models), with desktop valuations for more complex work and deals becoming available in the future.