Mortgage customers are in need of more education about their potential product options ahead of a record year for cessations in the remortgage and product transfer market, SimplyBiz Mortgages has stated.

The mortgage club also highlighted that with high volumes of customers coming to the end of their fixed rate deals in 2023, the market can also present significant opportunities for brokers.

CEO at SimplyBiz Mortgages, Martin Reynolds, told MoneyAge that he believes mortgage rates are now beginning to settle after the volatility that followed the government’s mini-Budget last September.

“In the remortgage and product transfer market, this is going to be one of the biggest ever years for cessations, with many people coming to the end of two and five-year deals,” Reynolds said. “There’s lots of opportunities for the broker market, but at the same time there needs to be lots of education to the customer.

“Rates are coming down from where they were after the mini-Budget, and we’re starting to see some with a three in front of them, which is good. I think the market is settling around this level now, and between 3.9% to 4.9% is where products are likely to be priced, depending on the LTV scenario. We just need to keep educating the consumer as often as possible.”

Figures released at the start of this year by the Office for National Statistics (ONS) revealed that more than 1.4 million households in the UK are facing the prospect of rising interest rates when they renew their fixed mortgages this year.

This data also indicated that a majority 57% of the fixed rate mortgages in the UK coming up for renewal in 2023 have been fixed at interest rates below 2%.

“Two years ago, customers may have taken a fixed rate below 2% and they will need to understand that even though rates have come down since October and November last year, they are still not going to get a rate anywhere near that now,” added Reynolds.

“This is where the broker is going to be working very hard, walking customers through their budgeting, letting them know this is where the market is, and that we may never return to that level of pricing again.

“As a broker you can’t over-communicate with your client bank. This also applies to people who may be up for renewal in 2024 and are already be worrying about it now. For those who can afford it, they need to know they could start chipping off some of the capital now and then might be in a lower LTV band come next year. All of this is where the benefit of advice and the experience of the intermediary can come to the fore.”

The ONS revealed this week that the rate of inflation in the UK still remains in double digits at 10.1% in the year to January, although this did represent a slowing from 10.5% in the year to December, and from a peak of 11.1% last October.

While the rate of inflation is starting to decelerate, the decision by the Bank of England (BoE) to increase its base rate to 4% at the beginning of February, the tenth increase in a row at its monetary policy meetings, may still not be the last interest rate rise of the year, after the Bank indicated rates could peak at 4.5% in 2023.

Reynolds said that this means customers who have opted for tracker mortgages in the last few years will be facing big decisions that could create a “good transitional market”.

“If we think the BoE’s base rate won’t go higher than 4.5%, they will have a decision to make over whether to stay on that tracker or whether it’s time to fix, now that volatility has calmed,” he added.

“There’s a lot of aspects that could create a good transitional market. If pricing does calm a bit, I’m hoping that from an adviser and broker point of view, they can at least change the market in a more orderly fashion compared to last year. With more steadiness in the pricing, as a broker firm you’re able to manage time more appropriately.

“Whether its the complexity of the number of products, the uncertainty of the market, changes in criteria, or what’s happening on affordability, all of these things push more people towards needing advice.”

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