Remortgagers fuel market activity increase – Octane Capital

While the mortgage market has shown signs of rebounding, remortgagers are driving this increase, data from Octane Capital has revealed.

The research showed that overall mortgage approvals rose at an average rate of 7.7% per month between October and December 2023.

However, in the remortgage space, there was a surge of 14.7% per month, compared with a modest rise of 4.6% for home purchase.

Other lending, including second charges, increased by 7.7% each month.

While approvals rose across the board, this was not a full recovery follwing a fall of 19.6% in August 2023, followed by a further reduction of 8.2% in September.

Approvals were also down compared with early 2022, when they regularly topped 130,000 per month; in September 2023 there were just over 70,000.

The markets grew more optimistic after the inflation rate fell to 3.9% in November, lower than was forecast, and closer to the Bank of England’s 2% target.

This led some economists to argue that the bank was more likely to lower the base rate in 2024 than raise it.

As a result, towards the end of 2023 swap rates dropped, which provided lenders with cheaper funding and therefore enabled them to drop their mortgage rates.

The inflation rate unexpectedly inched back up to 4.0% in December, so it is unclear how much of a push there is going to be for cheaper mortgage rates in the near future.

One worry is that strong remortgage activity in late 2023 could be followed by some weak months of approvals.

If mortgage rates do not continue to come down, according to Octane Capital, more homeowners might be inclined to wait and see until their current mortgage fully expires before remortgaging.

Jonathan Samuels, CEO of Octane Capital, said: “Mortgage approvals showed positive signs of recovery towards the end of last year, however the market is by no means back to full strength.

“Much of this increase has been driven by remortgage activity from existing homeowners keen to lock in a new deal while rates have dropped and the number of people taking out loans to fund new home purchases remains sluggish.

“With inflation showing a mixed picture it could take a long while for the Bank of England to cut the base rate this year, which could result in the market treading water in terms of activity for a good few months yet.”