Homemovers take advantage of strong competition in the market
Date online: 08/06/2016
... applications into completions during Q1 2016 with 80% of homemover applications resulting in an offer and 80% of offers leading to a completed deal.The tracker – using data from BDRC Continental – examines applicants’ journey through the intermediary channel from their initial mortgage enquiry through to completion. The Q1 edition splits out the results by firms dealing with first-time buyers (FTBs), homemovers, remortgagers, buy-to-let (BTL) borrowers and applicants for specialist loans.
It shows intermediaries dealt with an average of 49 new enquiries, with those focused on FTBs and homemover segments being kept busiest (55) followed by those doing BTL business (52).
Overall, 55% of enquiries in Q1 progressed to an agreement in principle (AIP), with the highest rate reported by intermediaries dealing with remortgages and specialist loans (59%). Those focused on FTBs saw the fewest initial enquiries (51%) progress any further.
This is likely to be influenced by a number of factors, including: affordability constraints; some aspiring borrowers making initial enquiries without looking to progress immediately; and others shopping around and exploring their options via multiple firms or channels.
Industry data on loans via intermediaries also points to seasonality as a factor. Both 2014 and 2015 saw FTB activity make a slower start to the year than homemover and remortgage activity, before registering the fastest growth of all three segments from Q1 to Q2.
IMLA’s data therefore highlights the potential for further growth in FTB activity this year, with demand continuing and FTB loans via intermediaries already up 15% year-on-year in Q1.
Homemovers most likely to progress to application stage and beyond
Overall, almost seven in ten (69%) AIPs in Q1 progressed to an application, rising to 72% among firms handling homemover and remortgage cases. These higher rates may be a sign of these borrowers having a firmer idea of their needs and an immediate wish to progress.
More than three in four (76%) applications received an offer, and the same percentage of offers (76%) resulted in a completion. In each case, intermediaries dealing with homemover cases reported the highest conversion rates (80%).
Comparing types of firm, members of Appointed Representative (AR) firms reported a 78% progress rate at both stages, compared with 73% among Directly Authorised (DA) businesses.
According to brokers, lender decisions to decline an application in Q1 accounted for fewer than three in ten (28%) drop-outs between AIP and completion stage, notwithstanding the option for those affected to keep progressing their application via another lender.
Almost three quarters of drop-outs (72%) occurred for reasons other than lender declines. Intermediaries dealing with first-time buyers reported a lower rate of lender declines (29%) than those dealing with homemovers (31%) or applicants for specialist loans (33%).
The Tracker also examines business confidence among intermediary firms in the first quarter of 2016. While the overwhelming majority remain confident about the future outlook, the data suggests a greater level of caution than at any point in the previous 12 months with more brokers reporting they are ‘fairly’ rather than ‘very’ confident.
Peter Williams, Executive Director of IMLA, comments: “Using an intermediary has become ever more established as the most common way to access mortgage finance in the UK. After a busy start to the year, this data suggests that homemovers, in particular, have taken advantage of strong competition between lenders and a fast expanding range of competitive products.
The first time buyer market typically picks up pace in Q2, although April’s stamp duty reforms have clearly disrupted normal patterns and will have a lingering effect on the supply of property. Credit conditions are just one of many factors impacting first time buyers’ journey from enquiry to completion, and the EU referendum adds another unknown into the mix for Q2 which won’t go unnoticed in terms of intermediary confidence and consumer behaviour.
In the meantime, despite the rush to beat the stamp duty reforms, our analysis also suggests there was no opening of the floodgates for BTL mortgages, with the progress of BTL applications remaining broadly in line with market norms. This suggests that standards of borrower assessment have held up well, despite the pressure of extra demand.
As the new index develops, we will be able to track how these flows fluctuate over time and gain insights into how efficient and effective the mortgage process is.”