The remortgage market experienced a strong first quarter driven by rising house prices across the UK, according to new data published by LMS.

LMS reported that its Remortgage Healthcheck Index rose by 9.6 points to stand at 64.4 in Q1, marking the highest reading since Q2 2015.

Excluding a temporary bounce back in Q3 2020, this was also the strongest quarterly gain in the overall index recorded since Q2 2013.

The LMS Remortgage Healthcheck Index records the overall health of the remortgage market and tracks tracks changes in four key indicators. These include volume and value of remortgage approvals, remortgage borrowing costs, homeowner equity value and consumer sentiment. LMS gives each indicator is scored between 0 and 100, with scores between 40 and 60 considered neutral, a score below 40 considered negative, and score over 60 seen as positive for the industry.

All four sub-scores of the index recorded quarterly increases in Q1, though the data revealed main drivers behind the uptick were the remortgage approvals and borrowing costs indicators.

LMS suggested this was driven by consumer appetite to lock in low mortgage rates, as well as a fall in interest rate spreads between lenders and borrowers, to indicate that banks are competing more actively for new borrowers by lowering their rates.

“Q1’s remortgage market was particularly strong, showing growth in all indicators and with the overall score hitting its highest value since Q2 2015, one year before the Brexit referendum which caused widespread uncertainty in the housing market,” commented LMS CEO, Nick Chadbourne.

“The strong borrowing costs indicator score is especially promising. Borrowing costs measure the gap between lenders’ own funding costs and the interest rates they charge to borrowers, and the rising score means lenders are passing their reduced costs to borrowers, signalling a positive outlook for the future as lenders fight for market share and borrowers feel the benefits.”

Chadbourne also said that rising house prices across England and Wales have continued to drive positive scores in the index’s homeowner equity and remortgage approvals.

“Rising house prices put homeowners in stronger equity positions and while approval numbers have plateaued since the beginning of the lockdown in Q2 2020, lenders are continuing to test the waters with larger loans, pushing the Remortgage Approvals indicator up,” he added.

“Looking ahead to the rest of Q2 2021, we will see the continued impact of government support schemes such as the Stamp Duty Land Tax holiday extension and government-backed 95% LTV mortgages.

“The extension of these schemes will continue to fuel house price growth across the majority of England and Wales, supporting Remortgage Approvals, driving up the Homeowner Equity score and contributing to healthy Borrower Sentiment, pointing to a continued healthy remortgage market for the remainder of H1.”

Share Story: