The LMS Remortgage Healthcheck Index for Q2 2019 produced an overall health score for the remortgage market of 49.3, down from 51.3 in Q1.
The index scored four indicators of market performance — volume of approvals, borrowing costs, homeowner equity value and consumer sentiment — giving each points from 0 and 100.
All four indicators scored in the neutral range from 40 to 60.
The score for approvals dropped to 42.6, down from 53.3 in Q1. Among LMS borrowers who remortgaged, 45 per cent took out a five-year fixed rate product. And 26 per cent stated that releasing equity was their primary reason for remortgaging, of which group 51 per cent would use the money for home improvements.
The rating for homeowner equity fell also, to 52.6, down from 52.8.
Scores rose for borrowing costs, to 46.6, up from 45.0, and consumer sentiment scored the highest rating at 57.0, up from 54.8.
On borrower costs, LMS suggested “an increase in the spread between the rates charged by lenders and their own funding costs suggests that borrowers may soon face tighter credit conditions as lenders seek to build up their margins to protect themselves against potentially higher risks in future.”
The slowing of price growth hit the homeowner equity score, with LMS noting figures from the Office for National Statistics which show that annual house price growth dropped to just 0.9 per cent in the year to June.
The index, which is produced in partnership with the Centre of Economics and Business Research (CEBR), measured consumer sentiment through a combination of LMS’s own polling on whether borrowers have increased or decreased their loan size, and a YouGov/CEBR consumer confidence index poll on issues such as job security, their financial position and house prices.
LMS noted that confidence appeared to be rising, driven by the large proportion, 45 per cent, of LMS re-mortgagers who had opted to increase the size of their loan.
Nick Chadbourne (pictured), chief executive officer at LMS, said that while many people naturally remortgage when their fixed rate comes to an end, “we have seen even more customers coming to the market”, as well as a “healthy proportion” looking to increase the size of their loan.
He continued: “These low rates mean that people can potentially save hundreds or even thousands of pounds each year by switching. It is interesting that few homeowners wanted to stay loyal to their existing lender, as this shows that banks can do more to keep their current customers happy.”
