By the time you read this, we will be very close to the end of what has been without doubt, a tumultuous year for advisory firms and their clients.
That said, despite the ebbs and flows we’ve seen so far in 2023 – particularly in terms of purchase activity and a general dip in gross lending – there is an emerging sense of relative stability and there are some green shoots of optimism to be aware of, to seize and capitalise upon.
Predominantly, these signs of optimism are most obvious in the remortgage space where a substantial volume of business is approaching maturity, not just in the current quarter but over the next six to 12 months too.
In this quarter alone there are over £100bn of both residential and buy-to-let remortgages due to come to the end of their terms. It doesn’t need me to point out the significant opportunity this presents to advisers, both in terms of protecting against consumer detriment and satisfying the needs of consumers, but also in terms of the commercial benefits to advisory businesses.
Reassessing the situation
Of course, there is a shift in terms of what an adviser will be able to offer their remortgaging clients. Where once, this was often a ‘reducing your monthly mortgage costs’ exercise with advisers recommending superior deals to returning clients, the current landscape – marked by rate increases – results in a focus on minimising the inevitable increase in monthly mortgage costs.
The likelihood is advisers will be dealing with clients reaching the end of two, three, and five-year deals, secured in a very different interest rate environment, unheard of in today’s best buy tables.
Advisers and consumers alike will of course properly explore product transfer (PT) offers, with many borrowers evaluating rates and their affordability, and contemplating remaining with their existing lender via a PT – but increasingly a remortgage returns once again, as the right choice for borrowers. This clearly reflects competitive lender product pricing.
For some clients, a PT will of course be the most suitable recommendation, but clearly this comes with a much-reduced procuration fee in most cases. Consequently, it’s imperative advisers conduct comprehensive market reviews, as positively, the market is and will offer an increasingly competitive array of options.
Naturally, lenders are assessing their business volumes and targets, not only for the remainder of 2023 but how they might start in 2024. With greater rate stability, we’ve started to see some discernible reductions in rates, not just from mainstream lenders, but also specialist residential players and within the buy-to-let space.
A solid footing
The Monetary Policy Committee (MPC) holding bank base rate again this month, the greater stability in swaps, combined with (and influenced by) the prospect of declining inflation, suggests future rate stability. This, in turn, furnishes lenders with increased assurance, thereby influencing their own product pricing models.
In the grand scheme of things, although the purchase market might not be flourishing to our collective hopes, there is a substantial wave of refinancing in the here and now, and on the horizon. All of which benefits from, and fuels the need for, professional mortgage advice.
Borrowers will of course feel uncomfortable with increasing monthly mortgage costs; however, if such an increase is inevitable, they would undoubtedly prefer it to be minimised as a result of your experienced advice.
When advisers spend time with remortgage clients, they obviously have the potential to uncover consumer savings in other areas, which can help offset any increased mortgage costs. This opportunity includes areas such as protection or general insurance, where competition amongst providers and insurers remains keen, yet many advisers sadly walk past this opportunity.
The potential of over £100bn in remortgage business is substantial by any measure. Advisers should be going all out to secure a significant share of this business this quarter, and in all subsequent ones, especially in a complex and competitive market that demands impartial and experienced mortgage advice.
Seizing the opportunity will be pivotal in defining the end of 2023 and how 2024 begins. It should be grabbed with both hands.