For so many years, remortgage activity has been such a mainstay of the overall market that it's somewhat odd to have lived through an environment recently where that was not so much the case.
We’ll all be acutely aware of how product transfer (PT) business has grown and how a changed interest rate environment, presenting far higher pricing to existing borrowers, has appeared to solidify its dominance.
According to the most recent figures from Intermediary Mortgage Lenders Association (IMLA) for last year, remortgage lending business fell from £82.73bn in 2023 to £78bn in 2024, and while PT lending levels also fell, we are still talking about this latter sector being three times that of remortgaging.
We should not forget that, in 2022, remortgage lending reached £107bn-plus, so these last two years of falling refinancing to another lender’s business was always going to be felt right across the market.
But, the outlook for remortgaging for both 2025 and 2026 does appear to be stronger. IMLA anticipates a £10bn increase in 2025, taking it up to £88bn, while this will grow further to £94bn in 2026.
And, as mentioned above, it may well come as something of a relief for the adviser community to learn the amount of PT business completed in 2024 was also down on 2023, especially considering that – at some points in the recent past – it has looked like PT would only continue to go in one direction.
That, however, faltered in 2024, with PT business down from just shy of £240bn in 2023 to close to £221bn last year. However, IMLA believes this will rise again to its 2023 level in 2025 and further again to £260bn in 2026.
Why does this matter? Well, of course, compared to remortgage activity, we are talking about PTs being approximately three times as much lending/business, and given most PTs pay less of a procuration fee than a full remortgage, advisers will need to be aware of the ongoing potential hit to their income levels.
Yet, there are clearly positives to be grasped from a somewhat different interest rate environment and the impact this might have on affordability.
Where, most recently, we might have had a situation where a significant number of borrowers could not meet the affordability criteria to be remortgaged to a different lender – and had to take a PT – now they are likely to have a greater array of options to be moved elsewhere.
Rate falls will make ‘affordability conundrum’ easier to solve
If, as anticipated, rates do continue to fall throughout 2025, then that makes the affordability conundrum that much easier to solve for a greater array of borrowers, some of whom might be having to sit on rates secured in the immediate aftermath of Liz Truss’ ‘mini Budget’, or indeed through 2023, when product pricing was up considerably on what had been available in the first half of 2022 or the year previously.
That’s an interesting point to note, of course, that those coming off five-year deals will have last secured their pricing in a very different, potentially much lower pricing, ‘world’, while those coming off two-year deals may well be able to secure far better rates than back then.
Whatever the deal that is coming to an end, there’s no doubting advisers should be priming themselves to deal with a healthy growth in existing borrower business; those who may well now be able to attain their most suitable deal through a different lender, rather than having to sit put.
Lenders making ‘concerted effort’ to offer more ‘attractive’ remortgage deals
Already, even in these very early days of 2025, we’re seeing a concerted effort from some lenders to offer more attractive remortgage options. We ourselves have just launched a fee-assisted legal service on a range of special edition, remortgage-only two- and five-year fixes, which we believe will be particularly welcome for those existing borrowers who are shifting to us, want to keep that upfront cost down, and also want to ensure they get excellent legal support to save them time and money when completing their remortgage.
One would expect the remortgage market will be a much healthier ‘battleground’ over the next couple of years, particularly if those rate cuts do materialise more frequently. Having options, not just on price but also criteria and add-ons such as fee-assisted legals, are also hugely important, as we should not underestimate what a difference this can all make to household finances.
The remortgage sector might have been somewhat subdued over the last couple of years, but the ground feels much firmer as we enter 2025, and advisers are likely to be required much more this year to deliver in this area. Let’s not lose sight of this opportunity as both advisers and lenders, as we seek to ensure refinancing borrowers have all the options they need.
