LMS has reported a “positive outlook for remortgaging in 2021”, despite a fall in the overall score of its Quarterly Remortgage Healthcheck Index.

The index shows the health of the remortgage market, and measures four key categories which are remortgage approvals, borrowing costs, homeowner equity and consumer sentiment.

For the fourth quarter of 2020, LMS said the main drivers for the fall in its data were lower remortgage approvals and borrowing costs indicator scores.

Each of the four key indicators is scored between 0 and 100, with scores between 40 and 60 considered a neutral outlook, a score below 40 is considered negative and score over 60 a positive outlook for the industry.

The overall index is the weighted average of each indicator score, and for Q4 2020 this score sat at 54.8, reflecting a fall from the Q3 score of 60.2.

“The main drivers for the fall were lower remortgage approvals and borrowing costs indicator scores, but given the wider economic and social climate these aren’t unexpected,” LMS CEO, Nick Chadbourne, commented.

“Continued caution from lenders meant high LTV products remained sparse and repayment rates crept back up, making the market less accessible to borrowers. Despite this, the number of approvals remained relatively flat, showing demand is still there.”

In the latest data, the remortgage approvals indicator suffered a reduction against data recorded in Q3, falling back by 14.4 points to 56.5 – its lowest level since the start of 2020. The borrowing cost indicator fell by 10.9 points in Q4 to 41.2, the lowest value since Q3 2012 and close to negative territory.

Elsewhere, the homeowner equity indicator recorded a strong performance in Q4 2020, rising by 7.8 points to 73.9 – which LMS reported is the highest value on record. Following falls in two consecutive quarters, the borrower sentiment indicator also recorded an increase of 2.7 points, pushing out to 57.3.

“Looking ahead, the surging house prices we saw through Q4 2020 did a good job of propping up the remortgage market as homeowners released equity from their property to cash in on its rising value or to secure a better deal,” Chadbourne added.

“The rising prices have continued through 2021 so far, continuing to sustain the market and hinting at continued growth through this year.

“We have already seen an uptick in remortgage activity in Q1 2021. Government support such as the extension of the SDLT holiday and fully-backed 95% LTV products take pressure off the purchase market in the short-term which may open up more opportunities for remortgage cases.

“However, these schemes add fuel to an already well-lit fire, and there needs to be continued support and clarity from the government to cement lender confidence and give the industry the necessary time to allow remortgage activity to strengthen through the year.”

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