After the Bank Base Rate fell to an historic low in early 2009, many borrowers were content to move to their lender’s SVR as the reversionary rates were so attractive.
As lenders built their stocks of these so-called ‘free-to-go’ borrowers, so the remortgage case load of the average mortgage intermediary fell, reaching around 20 cases a year by 2010 where it has been pretty much ever since.
Whilst we still await the numbers from our Q3 intermediary study, there are indications that things are changing. Recently we were asked by one lender to look at their SVR redemptions, which had started to pull ahead of forecast levels despite no change in pay rates. What was going on?
In most cases, the lost SVR borrowers had remortgaged away to fixed rate deals elsewhere. These borrowers had woken up to the falling cost of new fixed rate deals and decided to act. It took them some time, though.
Some claimed they had only just been released from their last fixed rate deal, whereas we knew from the lender’s data that they had been on SVR for at least six months and in some cases over a year. And even after they woke up to better deals, it typically took three months or more to complete their remortgage.
If we can generalise from this example (and it is a big if), then we are going through a change point. The inertia of free-to-go borrowers is finally melting away in the sunshine of lower fixed rate deals.
Because of the lead time to action, however, it will take quite some while for most of the free-to-go to get up and go. But there are signs that better times are coming for mortgage intermediaries, along with tougher times for lenders’ retention teams.
Tony Wornell is director of BDRC Continental
