The LMS Remortgage Healthcheck Index has reached its second highest reading for the fourth quarter of 2021, after rising 2.6 points due to faster growth in average approval values.

The index, produced in partnership with the CEBR, shows the overall healthcheck index reached a 70.1 reading.

This was mostly driven by a 5.7 point increase in the Borrowings Costs indicator, reflecting a narrowing of the gap between mortgage rates and lenders’ funding costs.

The Home Equity and Remortgage Approvals indicators also increased over the quarter, by 5.3 and 2.9 points respectively.

This means the Home Equity index hit a record high of 92 points, following Q3 when the indicator recorded its steepest ever increase since the same period in 2020. This has been attributed to a continued growth in house prices.

The Remortgage Approvals indicator reached 66.1 points for the quarter, reflecting an increase in the number and average value of remortgage loans.

Despite these positive movements, the LMS Borrower Sentiment index remained neutral at 58.6 after dropping 2.2 points.

This is the first drop into neutral territory for the index since Q1 2021.

LMS chief executive Nick Chadbourne says the drop in sentiment is “unsurprising” given the rising cost of living, which forced the Bank of England into a recent rate increase.

Looking ahead, the chief executive says he expects remortgage activity to remain healthy throughout the year.

“This is because the two year fixes that saw a spike in popularity when the housing market reopened in 2020 due to low interest rates are now beginning to expire,” says Chadbourne.

“This expected pipeline of activity is set against the ongoing energy crisis and post-furlough job market, so we’d expect these issues to play a part in the market over the course of this year as people remortgage to free up equity.”