The Intermediary – August 2025 - Flipbook - Page 19
RESIDENTIAL
Opinion
Making remortgage
applications
headache-free
A
s predicted by UK
Finance in December
last year, 2025 has
been characterised by
a strong performance
in remortgage
volumes. Data from Legal & General
shows a significant increase in
remortgaging activity in the UK
housing market, with figures for Q1
2025 showing that broker searches for
remortgage products soared 34% since
Q4 2024.
With the changes to Stamp Duty
that came in April, March saw a surge
in activity and September is set for
another big bump in volumes. There
are several reasons to expect this
positive trend to continue.
Mortgage rates have become even
more competitive. Lenders have been
pushing the lower loan-to-value (LTV)
deals below 4% for months now,
illustrating just how tough the game
is proving to retain customers coming
up to refinance.
While the summer months have
seen a slight soening, typical for
this time of year, a large tranche of
fixed rates is due to end as we move
into the Autumn. According to UK
Finance, roughly 1.8 million fixed rate
mortgages are set to reach maturity in
2025, up from around 1.6 million in
2024. A further 1.9 million fixed rate
deals expire in 2026.
While there remains a swathe of
borrowers coming up to the end of
very low 5-year fixes, the majority
of those refinancing over the next 18
months will be facing the prospect of
their monthly repayments falling.
According to research from
Compare the Market – based on
data from a Freedom of Information
request to the Financial Conduct
Authority (FCA) and data from the
Bank of England – around 940,000
homeowners are coming off 2-year
fixed rates in 2025.
Moneyfacts data showed average
fixed mortgage rates fell for the fih
consecutive month at the start of July,
with the average 2-year fixed mortgage
dropping to 5.09%, its lowest point
since September 2022 when rates
hovered around 4.24%.
Similarly, typical 5-year fixed prices
dipped to 5.08% and were last lower in
October 2024 at 5.07%. It’s likely that
we’ll see rates come down further as
lenders vie for the best customers.
Product transfer volumes,
supported for several years by
borrowers’ need to avoid lengthy
affordability checks on much larger
mortgage payments, have seen a
drop in popularity this year. This is
hiing lender margins – remortgage
origination is more expensive to
underwrite and source. It is this that is
driving such fierce rate competition.
But lenders’ desire to maximise
customer retention using pricing
has also encouraged more borrowers
to switch.
Easy street
At the start of the year, remortgaging
to another lender triggered a full
reunderwrite of a borrower’s
affordability. While there are always
those willing to go through the admin
this presents, the majority of people
will trade a couple of basis points for
an easy life.
That dynamic has shied. In July,
the Financial Conduct Authority
(FCA) published the first in a series
of measures expected in the coming
months, designed to make the process
of remortgaging easier.
The requirement for a full
affordability assessment when
reducing the term of a mortgage
has now been removed, though the
HAMZA BEHZAD
is business development
director at Finova
FCA still expects firms to consider
affordability in line with their
responsible lending policy and the
Consumer Duty. In addition, the
modified affordability assessment
has been amended to include new
mortgage contracts with new lenders
where it is more affordable than either
the customer’s current mortgage,
or a new mortgage product that is
available to that customer from their
current lender.
While the changes are permissible
rather than mandatory, we expect
to see more lenders allow borrowers
on lower LTVs, particularly where
outstanding balances are small, to
forgo a full underwrite.
This is likely to further incentivise
intermediaries to source deals from
alternative lenders when clients
approach their refinancing deadlines,
and it’s this that should be concerning
for lenders that have been relying on
the market to support their retention
business. It won’t be enough in this
new environment.
Borrowers in a strong position no
longer face a stark choice between
hassle or no hassle. The FCA’s rule
changes will make pricing even keener
and the importance of service critical.
Where lenders do not have the cost
of funds needed to compete with the
high street banks on price, borrowers
will need the offer of something else
worth their while if they are to accept
a slightly higher rate. This is where
the process of retention really maers
– certainly for direct to customer
remortgaging, but crucially, also for
brokers. Lenders in this bracket tend
to rely heavily on intermediaries –
making their remortgage applications
as headache-free as possible is set to be
the gamechanger from now on. ●
August 2025 | The Intermediary
17
