The remortgage market has weathered a challenging year. When business stopped and the housing market closed due to the coronavirus pandemic, remortgages supported the housing industry and meant it could continue in some form through the turbulent time.

We will face new challenges in 2021, but if we have learnt anything from this year, it is that the industry is resilient enough to tackle them.

An industry in lockdown

April and May were particularly challenging for all sectors, as social distancing forced a huge portion of the workforce to work from home, and household finances were put under unimaginable pressure.

However, the remortgage market stayed strong and outperformed many other areas as borrowers took advantage of record-breaking low rates and the industry got into the swing of processing cases remotely.

The pipeline contracted by just 9% between 1 January to 30 April as remote valuation solutions and product transfers allowed business to continue at a healthy level.

When we came out of lockdown in May, the housing market boomed. House prices rose, and continued to rise, so much so that recent figures claim homeowners have made more money on their property in the past 10 months than they did in the three-and-a-half years prior.

These rising house prices presented new opportunities for borrowers – remortgagers were able to secure better deals thanks to increased equity and more homeowners began to assess their options to sell up and move after weeks confined to their homes.

Additionally, lower interest rates across the board created more competitive product offerings for both purchase and refinancing.

The government further fueled activity in the purchase market by raising the stamp duty tax threshold from £125,000 to £500,000 to give many prospective buyers a stamp duty holiday until 31 March, 2021. As rising property values and a temporary tax break enticed more homeowners to the purchase market, broker, lender and lawyer capacity became increasingly stretched and the pressure was felt across the entire industry.

Fast forward to the present day and the capacity issues caused by the booming home-moving market have led to a fall in remortgage activity.

We entered December with activity levels down 61% from January. However, this is no cause for alarm. We are seeing the number and the value of approvals begin to rebuild as lenders regain their confidence and cases that are processed are done so efficiently and securely.

This demonstrates that when normal capacity resumes in the New Year, the industry will be ready to process cases at healthy levels.

Forward focus

Looking forward to 2021, we’re faced with the task of predicting an unpredictable year.

2020 has taught us how resilient and adaptable the remortgage side of the housing industry is. Sophisticated technology allowed business to continue largely unscathed throughout the year and by the time of the second lockdown in England, and the firebreak in Wales, tech was in use to ensure there was little impact on activity as a whole.

Similar to what we saw following the surge in remortgage cases in 2017, the lessons learnt across the homemover industry since March will need to be carried forward to ensure a secure and efficient service for stakeholders in the future.

Additionally, vaccine approvals are gathering momentum throughout the world and the vaccine is already being rolled out to thousands of people in the UK.

This development provides green shoots of a return to normality, which in turn improves confidence for both lenders and borrowers.

Central government will continue to invest in the economy to fuel growth, hopefully keeping as much of a lid on unemployment as is possible.

Positive trends in the economy may allow lenders to offer a more relaxed criteria and further encourage borrowing.

31 March

Until 31 March, it is likely we will see a continuation of the subdued remortgage market we are in currently. This date marks the end of the stamp duty holiday, mortgage payment holidays, the furlough scheme*, and the current Help to Buy equity loan scheme.

Lender, broker and conveyancing capacity will continue to be stretched significantly and hopes of deadline extensions for any of the above are looking unlikely. However, as we move into Q2, it is likely that remortgaging will return to the fore as the activity in the purchase market softens and industry capacity increases.

Product transfers

Product transfers soared through 2020 as a result of the capacity issues caused by the pandemic. Over 90% of market activity in Q4 this year is likely to come through product transfers, significantly higher than anything we have seen before.

As the focus turns to remortgaging, lenders will likely look to win new business through remortgage cases.

We will see lenders adjusting rates and criteria throughout the year to balance the books following bumper purchase completions in Q1. As remortgaging becomes the acquisition focus we can expect product transfers to decrease to normal levels.

Economic forecasts suggest that the Bank of England base rate will remain low for a while longer which will help lenders to offer low rates and present excellent opportunities for borrowers.

The tech acceleration that we have seen since March will also come into play when we’re looking at 2021. Significant changes have been made to allow for a more efficient, secure and streamlined mortgage application, and this will allow lenders to harness new ways to win business through the year.

A positive outlook

Ultimately, the mortgage industry has navigated an unfathomably challenging year. While the current limited capacity will continue until 31 March, resulting in little significant change until after Q1, we can expect a growth in stability and normality as we move further into the year.

Access to a vaccine and the hopeful return to some sense of normality should come by summer which will improve borrower confidence and support the market moving forward.

There will be a push for new business by lenders, leading to a focus on remortgage business which will spell good news borrowers through competitive rates.

*This article was written just before the government announced it was extending the Furlough scheme to the end of April 2021

Nick Chadbourne is CEO of LMS