The LMS Remortgage Healthcheck Index, produced in partnership with the Centre of Economics and Business Research (CEBR), showed this was a 9.6 point increase on the previous quarter.
The index measures the remortgage market according to the volume and value of remortgage approvals, remortgage borrowing costs, homeowner equity value and consumer sentiment.
It asks brokers to rate the overall health of the remortgage market with scores between zero and 100. A score of 60 or above suggests positive sentiment for the industry while scores below 40 are negative.
The performance of the remortgage market was attributed to consumer appetite to lock in low mortgage rates as well as a decline in interest rate spreads between lenders and borrowers. LMS said this showed banks were actively competing for new borrowers with lower rates.
The score for remortgage approvals rose 12.9 points to 69.4, nearing the all-time high seen in Q3 2020 when the economy reopened following the nationwide lockdown.
As property prices rise, this suggests homeowners of more expensive properties are using this period as a chance to secure low rates while they are available.
Borrowing costs and borrower sentiment recorded neutral scores of 59.6 and 59.1 respectively.
While rates for two and five-year fixes decreased over Q1, pricing for 10-year terms rose slightly. Additionally, consumer confidence showed signs of recovery with the borrower sentiment score at a record high, due to the vaccine rollout and return to normality.
Homeowner equity saw an uptick of 0.8 points to 74.6 as house prices continued to rise albeit at a slower pace towards the end of the quarter.
Nick Chadbourne (pictured), CEO at LMS, said: “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.
“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.”
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 per cent loan to value (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.”
