This is according to the latest LMS Remortgage Health Check which has provided an evaluation of this area of the market in Q3 2021 and offered an overall ‘positive’ verdict of the sector’s performance.

According to the study, which was carried out in partnership with the Centre of Economics and Business Research (CEBR), Q3 marked the first time in five years a positive ‘overall score’ had been recorded by LMS’s index.

Using an indicator system for key areas of the market between 0 and 100, the overall score climed from 48.5 in Q2 to 60.2 in Q3.

This puts the index in ‘positive’ territory and provides indication, according to LMS, of a strong recovery in the market outlook – even when compared with pre-Covid performance.

LMS thinks this was primarily driven by an enormous improvement in the Homeowner Equity indicator, up 66.1 points from 0 in Q2, and strong growth in the Remortgage Approvals indicator (up 11.5 points to 70.9), thanks to high product transfer volumes.

However, LMS also noted the gaps between the rates charged by lenders and their own funding costs, commonly known as ‘spreads’, had increased leading to higher borrowing costs for consumers in Q3.

Additionally, fewer customers increased their overall loan size from Q2 to Q3, despite an improvement in consumer confidence, pushing the sentiment indicator down slightly.

‘Encouraging sign’

Nick Chadbourne, CEO at LMS, said the strong scores for both approvals and equity indicators were a really encouraging sign for the health and resilience of the market.

“House prices rising mean more borrowers qualify for better loan-to-value products, and bigger loans mean they have more control over their biggest asset – their home,” he added.

“Many have been hit hard by the pandemic, but the vast majority have more cash in the bank as hospitality and travel spending has dropped. Growing loans for home improvements are a sign of confidence as homeowners are prepared to spend those savings.

“It is also promising to see an increased number of cases being approved by lenders, as credit availability will be key to the continuing economic recovery.

“It’s likely that a lot of these cases were product transfers, which undoubtedly provide an easier journey, but don’t often give the best value for money. If the ultra-low Bank of England base rate, high demand and government incentives like the stamp duty cut continue over the next months, we could see even more improvement, but those who just product transfer might lose out in the long-term.”