Mortgage Solutions has seen confidential figures from the trade body which predict a near 25% fall in the value of repeat business being completed in 2020.
Overall, UK Finance expects a 12% drop in lending in 2020, with the residential remortgage and product transfer markets down 23% and 25% respectively.
The buy-to-let market is also likely to be hit hard with a 23% drop in remortgaging predicted.
The impact may be particularly significant for brokers as remortgaging has been driving the market for the last year and seems set to do so in 2019.
The UK Finance data predicts gross mortgage lending will rise to £278bn in 2019 from £268bn this year, before dropping sharply to £246bn in 2020.
Homeowner remortgages are expected to continue rising to £95bn in 2019 from £86bn this year, but by 2020 they are forecast to slump to £73bn.
Product transfers are expected to fall to £125bn in 2020, after an increase next year to £166bn from £151bn in 2018.
Meanwhile, buy-to-let remortgages are predicted to increase to £30bn next year from £27bn in 2018, before dropping to £23bn in 2020.
Brokers’ overview
Brokers and market experts noted that the drop is likely the result of customers taking out long-term deals, and highlighted that diversifying business might be essential to mitigate the impact.
Tony Wornell, from research agency BVA BDRC, agreed that the combined product transfer and remortgage market will slightly rise over the next year or two, driven by low interest rates.
He said: “Following the peak, I would expect to see re-mortgage and product transfer activity slowing after 2019 because interest rates are likely to rise and more borrowers are taking long-term fixed rates.
“The effect of this is to take them out of the active market until their deal ends.”
David Hollingworth, director of L&C Mortgages, said as more people were in five-year fixed deals, they were not looking at remortgaging. Instead new customers and income streams could be vital.
He added: “Looking after existing customers will continue to be important. As product trends shift, advisers will potentially find that they will not see some of their existing clients as regularly as they had in the past.
“While it will be crucial to keep in touch with existing customers as closely as ever, it will also become important to be able to attract new customers.
“Being overly reliant on repeat remortgage business can see peaks and troughs like any other part of the market, so having diversity in the business should help to minimise the impact.”
Also Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said intermediaries needed to ensure they were focusing on other opportunities in the market.
This could include growth areas, such as later-life lending, inter-generational lending, new build and specialist buy to let to name but a few.
He added: “Good advice is absolutely key in these areas and so they represent opportunities to thrive in, particularly as lending options in this area become more and more sophisticated.”
Cunnington pointed out that a small drop would not be a surprise, but the competitive market among lenders may remain in 2020.
He added: “This will help to keep rates low and the gap between a new fixed-rate and the lenders’ standard variable rates (SVRs) will stay high, which will mean the remortgage market will certainly remain buoyant.”
Arrears and possessions steady in 2020
A small bright spot from the data were encouraging figures showing that mortgage arrears and possessions are likely to remain generally steady in 2020.
Mortgage accounts in arrears are expected to rise slightly to 87,300 in 2020 from the 84,100 predicted in 2019. The same figure stood at 82,100 this year.
Possessions are expected to increase slightly to 7,100 in 2020 from 7,000 in 2019. This year possessions stood at 6,700.
However, property transactions will be likely to fall following the entire market, with UK Finance predicting a drop to 1,100,000 in 2020 from an expected 1,139,000 in 2019.
This year the property transactions stood at 1,188,000.
UK Finance declined to comment on the figures.
New lending to first-time buyers in the month stood at £6.1bn, 5.2% more year-on-year compared to £5.8bn in August 2017, according to the latest figures released by UK Finance.
However, new homeowner mortgages completed in August fell by 2.3% to 38,000 from 38,900 in the same month a year earlier. The £8.5bn of new lending in the month was the same year-on-year.
Remortgages dip
The number of new homeowner remortgages completed in August dipped by 0.3% to 37,100 from 37,200, standing at the same value year-on-year of £6.5bn.
New buy-to-let home purchase mortgages completed in August fell by 13% to 6,000 from 6,900 in the same month a year earlier. By value this was £0.8bn of lending in the month, 20% down year-on-year.
New buy-to-let remortgages completed in the month increased by 4.5% to 13,800 from 13,200 in August 2017. By value this was £2.2bn of lending in the month, 4.8% more year-on-year.
Jackie Bennett, director of mortgages at UK Finance (pictured), said that house purchase completions remain stable, driven by the number of first-time buyers, which reached its highest monthly level since June 2017.
She added: “BTL remortgaging saw relatively strong growth in August, due in part to the number of two-year fixed deals coming to an end. This suggests that while new purchases in the buy-to-let market continue to be impacted by recent tax and regulatory changes, many existing landlords remain committed to the market.
“However, the homeowner remortgaging market has softened slightly, reflecting the many borrowers who had already locked into attractive deals in the months preceding the Bank of England’s base rate rise.”
BTL purchase market remains flat
David Copland, director of mortgage services at TMA, said that the year looks set to continue in the same trend, with a flat buy-to-let purchase market as this area remains less attractive to landlords due to the flurry of regulatory changes the sector has faced this year.
He added: “This is coupled with a steady remortgaging market and a rise in product transfers, owing to the number of fixed rates reaching maturity and needing renewal over recent months.
“Despite the increase in first-time buyer activity, a large proportion of increased lending is still resting on remortgaging activity and advisers are doing a sterling job of locking customers into the best possible rates. Today’s current low rates won’t last forever, particularly with the economic uncertainty of Brexit just around the corner, so we always advise acting sooner rather than later.”
New homeowner remortgages increased by 23.1% in July from the same month a year earlier to stand at 46,900, while new home mover mortgages dropped by 3.8% to 32,600, according to the latest figures released by UK Finance.
The £8.7bn of remortgaging in the month was 26.1% more year-on-year, while the £7.3bn of new lending in the month was the same year-on-year.
First-time buyer mortgages and buy-to-let home purchases
New first-time buyer mortgages increased by 1.0% to stand at 31,400, compared to the same month a year earlier.
The £5.4bn of new lending in the month was 5.9% more year-on-year.
There were 5,500 new buy-to-let home purchase mortgages completed in the month, some 14.1% fewer than in the same month a year earlier. By value this was £0.8bn of lending in the month, 11.1% down year-on-year.
There were 14,700 new buy-to-let remortgages completed in the month, some 7.3% more than in the same month a year earlier. By value this was £2.4bn of lending in the month, 9.1% more year-on-year.
Homeowners lock fixed-rate deals after BoE rate rise
Director of mortgages at UK Finance Jackie Bennett (pictured) said the residential remortgaging market saw its strongest July in over a decade, as homeowners pre-empted the latest Bank of England rate rise by locking into attractive fixed-rate deals.
She said: “There was also considerable growth in remortgaging in the buy-to-let sector, showing that while recent tax and regulatory changes are impacting on new purchases, many existing landlords remain in the market.
“The number of first-time buyers has returned to modest year-on-year growth. However, affordability remains a challenge for many prospective borrowers, underlining the importance of clarity over the future of schemes such as Help to Buy.”
The era of low interest rates will not last forever
Kevin Roberts, Legal & General Mortgage Club director Kevin Roberts said that increased innovation coupled with competitive solutions continues to drive the mortgage market forward.
He added: “Government schemes like shared ownership and Help to Buy are giving thousands of first-time buyers that extra bit of support they need to secure their first home.
“However, we all need to be prepared for potential changes in the market that may lie ahead. Regardless of the Bank of England’s decision tomorrow, the era of low interest rates will not last forever.
“Those coming to the end of their mortgage term, or indeed seeking their first mortgage, should speak with an adviser now to secure a good deal while rates remain at near record low levels. Not only will advisers be able to provide a far wider range of products, but they can also give buyers the guidance and support they need when planning their first or next step on the housing ladder.”
Rob McCoy, senior product & business manager at TMA, said that it is likely the low number of people moving home can be attributed to the World Cup having temporarily distracted a lot of the UK’s attention, alongside the annual flurry of summer holidays.
He added: “Advisers should already have been working hard to contact their backbook and secure clients the best rates on the market, particularly in the wake of the interest-rate rise in August. As autumn approaches we are expecting to see clients settle in their properties with longer, fixed term rates.”
First-time buyer mortgages completed in June totalled 34,900, a drop of 3.6% compared with the same month a year earlier, according to the latest figures released by UK Finance.
The £5.8bn of first-time buyer lending in the month was 1.7% down year-on-year, with the average first-time buyer aged 30 and having a gross household income of £42,000.
There were 33,700 new home mover mortgages completed in June, 7.9% down on the same month in 2017, with the £7.3bn of new lending in the month also down 6.4%.
The average home mover was 39 and had a gross household income of £56,000.
Remortgaging
In contrast remortgaging continued to push forward with 37,400 new homeowner remortgages completed in June, up 8.4% from the same month a year earlier.
The £6.8bn of remortgaging in the month was also 13.3% up year-on-year.
Buy-to-let mortgages
Buy-to-let (BTL) home purchase mortgages completed in June dropped sharply by 19.4% to 5,400 while the £0.8bn lending was 11.1% down.
There were 12,600 new buy-to-let (BTL) remortgages completed in the month of June, the same as June 2017. By value this was £2.0bn of lending in the month, the same year-on-year.
Jackie Bennett, director of mortgages at UK Finance (pictured), said: “Remortgaging continued to dominate in June with figures up 13% on the same period last year as existing two and three year products came to an end and borrowers opted for new deals.
“Despite a boost in recent months, speculation of a base rate rise saw the market remain relatively subdued with year-on-year declines in activity among both first-time buyers and home movers as customers adopted a wait and see approach.
“House price inflation has moderated in recent months yet it still remains above earnings growth, and so affordability is still a challenge for would-be borrowers.
“And although the full impact has yet to be felt, tax and regulatory changes continue to bear down on borrowing activity in the buy-to-let purchase market,” she added.
Continuation of housing challenges
John Eastgate, sales and marketing director at OneSavings Bank, said: “The housing market slowed as economic uncertainties persisted thanks to Brexit and well-founded expectations of a rate rise.
“Stamp duty continues to deter purchase activity in more expensive areas and this has consequences for the whole market, so the large fall in purchase activity is no great surprise. With activity falling, housebuilding way off its long term target and a continuing lack of political clarity on housing policy, we will surely see a continuation of current housing challenges.
“The social housing sector clearly won’t be able to plug the demand gap, with any form of additional funding conspicuous by its absence in the social housing green paper. All this means is that as demand for housing continues to grow, supply isn’t rising fast enough, so rather than taxing the private rental sector more, as has been speculated, it should be seen as part of the solution.”
Victoria Jefferies, proposition director at Primis and PTFS, said the demand for remortgages continued to be a key theme in the wake of the Bank of England’s rate rise.
She added: “These figures are not only testament to the hard work that brokers have done to educate their customers about the benefits of remortgaging, but also show that borrowers are eager to lock in favourable rates before any further rate rises.
“It would be great to see a rise in the number of first-time buyers next month as innovation in the mortgage market continues to heat up, making it easier for these borrowers to access the funds they need.
“Brokers and lenders are continuously looking for ways to simplify the mortgage process to ensure more people can get their foot onto the properly ladder – so watch this space.”
