In the past week, both HSBC and Santander have repriced, with the cheapest rates available being for remortgages rather than purchases.
In light of this, Newspage asked brokers why this is, and whether it is a trend they expect to continue in the weeks and months ahead.
Hannah Bashford, director at Model Financial Solutions:
“It’s no surprise the housing market has been relatively depressed for the past 12 months, and although lenders have been prioritising purchases and repricing to attract that type of borrower it seems they are now keen to tap into the 1.6 million remortgages that are due in 2024.
“This could be a smart move from those lenders as they prioritise existing borrowers who may be a safe bet and an easy win to get business on the books.
“I wouldn’t be surprised to see competitive remortgage pricing this year.
“It is more important than ever to seek advice as lenders battle through a rate war to increase market share: staying with your current lender and not shopping around may mean you lose out.”
Darryl Dhoffer, mortgage expert at The Mortgage Expert:
“Let’s dissect this remortgage business with the ferocity of a bulldog chomping on a juicy bone.
“Why, you ask, are lenders giving remortgages the red carpet treatment?
“Well, it’s all about navigating the choppy waters of the market, just like navigating the Channel in a bathtub.
“Firstly, remortgages are safer options for lenders, like lending to a seasoned captain with a proven track record, not a wide-eyed first-time buyer just setting sail.
“Secondly, remortgage rates, if they keep falling, will feel like a raft in stormy seas for potential consumers.
“As for the housing market, increased remortgaging might keep the market afloat, by people staying put fixing up their homes or clearing debts.
“On the other hand, fewer mortgages could mean fewer purchases on the horizon, which lenders may be expecting, hence reducing remortgage rates.”
Gary Bush, financial adviser at MortgageShop.com:
“UK lenders, in some cases, need to regain market share and in order to get 2024 off to a flying start on these targets they are looking for reasonably quick turnaround business, in this case remortgages.
“Being chain-free they don’t have to suffer from potential queries and delays that can occur on purchase cases.
“We expected the fixed rate market to be very competitive this year and so far our assumptions have been correct.
“Lenders have come out fighting with some great rate reductions in their corner.”
Justin Moy, managing director at EHF Mortgages:
“Remortgages are typically a much quicker transaction, so if a lender is looking for some immediate benefit from the price cuts, remortgages should give more instant results towards any targets.
“Purchase business will eventually come through about four to five months later, notwithstanding normal levels of drop-off cases, and deals that are placed elsewhere.
“The rates will be similar over time, the difference is not a lot financially but just reflects the type of business certain lenders will be looking for at any time.”
Paul Kermath, chief operating officer, Finanze Group at Finanze:
“It’s a savvy move. When you’re in a rate war on new business why not go to the relatively safe haven of remortgages?
“Get those with a proven track record to refinance. It’s faster, cleaner and a good way to capitalise on people feeling better about borrowing without having to push themselves further up the property ladder.
“No chains to worry about and, with many people wanting to ‘improve rather than move’, it’s a perfect product for a willing market.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“Remortgages are often seen by lenders as the low hanging fruit as they usually complete quicker than purchase applications and have much less fall-through.
“There is also the added incentive in taking clients away from their direct competitors to influence market share.
“Lastly, remortgage clients will have a more reliable track record than, say, a first-time buyer, therefore presenting less risk.”
Peter Stokes, director of mortgages at Davidson Deem:
“This is fairly normal practice for this time of the year.
“Home movers either got their applications in well before Christmas to try and be in for the festive period, or they tend to postpone moving until Spring, which traditionally is one of the busiest moving times of the year.
“Therefore, lenders switch their focus to remortgaging, as they want to get a good head start on the year.
“However, I would fully expect those lenders that are prioritising market share to bring purchasing products in line with remortgaging (or better) in the next month or two.”
Graham Cox, founder at Self Employed Mortgage Hub:
“Lenders probably want to get some quick business in, and remortgages is low-hanging fruit. I don’t see this trend continuing.
“My best guess is that, by the Spring, purchases and remortgage pricing will be at parity.”
Jack Tutton, director at SJ Mortgages:
“The tactic HSBC and Santander have taken will be down to the high number of mortgages that are coming to the end of their current deals in 2024.
“The purchase market has struggled more recently due to high-interest rates and the increased cost of living, so it is no surprise that lenders are targeting remortgages as they look at their objectives for 2024.
“It will be interesting to see if lenders offer such aggressive products to existing mortgage customers as this doesn’t seem to be the case with some of the larger lenders.”
Simon Bridgland, broker and director at Release Freedom:
“I would think that, with first-time buyers and home movers being thin on the ground, lenders need to fill their new business pipelines somehow.
“All lenders are currently chasing a consistently reducing pool of applicants, due to people’s affordability still being squeezed by the cost of living.
“The remortgage market is prime real estate for lenders, so my guess is that criteria for this type of business will become a little more flexible over the coming months as lenders battle with one another to try and attract that type of applicant.”
Richard Thompson, director at Abbeydale Mortgages:
“Currently, there is a notable emphasis on remortgages by lenders, given the awareness that a substantial number of mortgages from the first quarter will soon reach the end of their fixed-rate periods.
“Many mortgage customers seem to have adopted a wait-and-see approach regarding interest rates.
“Consequently, the focus on remortgages is a reflection of this. However, I anticipate a shift in focus over the next few months.”
Laura Bairstow, founder at The Mortgage Masters:
“It’s great to see lenders looking after their existing clients.
“With rates reducing, it makes sense for lenders to be more comfortable lending to those who already have a proven track record of meeting their monthly payments.
“Lenders may also be prioritising remortgages as they can keep the rates lower, which is great for the headlines, by not needing to factor in costs of additional incentives such as free legals or cashback options.”
Denni Tyson, mortgage broker at Henchurch Lane Financial Services:
“I think lenders are now battling it out to grab business away from loyal customers and product transfers.
“Everyone is now talking about rates and their decline, so existing homeowners are going to look at all options to secure the best deal and even go to a new provider.
“Also, many offer a free legal service with products so it’s a win-win for a consumer as the cost is minimal to move lender.
“The remortgage business is where banks will be seeking to improve their market share, especially if there are strong rates at three years plus.
“The housing market is going to trickle on, but lenders know homeowners are going to be prioritising their new mortgage rate for 2024 and not have a repeat of 2023.”
Luke Thompson, director at PAB Wealth Management:
“Lenders are prioritising remortgages as they are aware that not as many people are able to purchase at the minute but that there are large amounts of customers who are now coming off their cheap 2021 and 2022 rates.
“I feel lenders missed the boat with this last year in terms of driving new business as the vast majority seemed happy to just take Product Transfer business and were not too concerned about having cheap rates to get themselves new business.
“I think this is now starting to bite them as you have to feel many lenders will have failed to meet their targets last year and thus now we are seeing heavy rate cuts to enable them to be competitive in the market and hope to make back some of the market share they may have lost out on in 2023.”
Jamie Alexander, mortgage director at Alexander Southwell Mortgage Services:
“UK lenders are strategically focusing on remortgages to swiftly regain market share in 2024. With no chains involved, this move allows for quick turnarounds, sidestepping potential delays common in purchase cases.
“As predicted, the fixed-rate market is intensely competitive, with lenders proactively reducing rates.
“In the ongoing rate war, opting for remortgages proves to be a savvy move, capitalizing on those with a proven track record for faster and cleaner refinancing.
“This aligns with the trend of individuals choosing to improve rather than move, presenting an ideal product for the current market.”
Mike Staton, director at Staton Mortgages:
“It’s clear to me that lenders can see a booming remortgage market and who can deny it, the lenders have influenced a deluge of clients to sign up for highly priced 5-year fixed rates, preying on the panic caused by the cost-of-living crisis like a vulture over a rotting carcass.
“These lenders fully expect to coerce these clients into paying high penalties to exit these mortgages for the chance of reducing their already overburdened outgoings.
“It’s like watching the Titanic sink but it turns out the lenders were the iceberg.”
