Confidence amongst mortgage brokers reached its highest level since 2015 in the third quarter (Q3) of the year, as mortgage activity increased, according to the latest Financial Advisers Confidence Tracking (FACT) Index from Paragon, which is based on interviews with 199 mortgage intermediaries.
The FACT Index, calculated as a percentage of a baseline figure and adjusted to account for the volume of business that advisers expect to complete over the following quarter, scored 105.9 in Q3 2017 – the first increase for a year, the highest score since Q4 2015 and the second successive quarterly rise.
This is in part due to increased activity in the mortgage market, with the average number of mortgages introduced per adviser’s office in Q3 at 24 – up by 9% on Q2 and 8% on an annual basis. This is the third highest figure recorded since the 2008 financial crash, and maintains the long-term recovery seen since a record low of 14 in 2009.
Remortgaging remained the most common type of borrowing, with a slightly reduced majority of 36%. There was little fluctuation in all other borrower types, with buy-to-let borrowing stable again at 17% (up by 1%), following a sharp decline in the previous year. First time buyers also saw a 1% rise on the quarter, maintaining a modest long-term upward trend over the past decade.
On average, mortgage advisers expect to do 2.4% more mortgage business in Q4 2017, with the expected number of cases in the next three months stable, at four, maintaining the reversal of a two-year downward trend between 2014-16.
Half (50%) of brokers said that, compared with the last 12 months, they expect buy-to-let business to stay the same in the next 12 months. On average, mortgage advisers expect to do 3% less buy-to-let business in that period. This is the same as in Q2, but remains comfortably higher than the historic low of 6% seen in Q1 2016.
In buy-to-let, 9% (up by 3%) of intermediaries described landlord demand as strong or very strong, while the majority (53%) described it as weak or very weak – the same as in Q2.
Remortgaging remained the most popular reason for obtaining a buy-to-let mortgage in Q3, accounting for a slightly reduced majority of 50% of all buy-to-let business. The steep upward trend in remortgaging since Q4 2013 has been matched by a long-term decline of first time landlords, which grew slightly from a near record low of 13% in Q2 to 14% in Q3.
Brokers reported a record number of landlords remortgaging to achieve a better interest rate in Q3, accounting for 56% of all cases, while a historic low of 33% of landlords remortgaged for the purpose of raising capital in the same period. This is the culmination of a long-term trend, and fewer landlords raising capital can be linked to the small decline in overall remortgage cases in Q3.
John Heron, the Managing Director of Mortgages at Paragon, comments: “A wide variety of recent data on housing has pointed to a market that has been finely balanced. Low transaction numbers have been bolstered by higher numbers of first time buyers, house prices outside London have been creeping up and landlord activity has stabilised.
“These trends are confirmed by our latest intermediary survey, with confidence now at the highest level for some time. Despite a rather uncertain environment, intermediaries are seeing higher levels of remortgage activity and at least stable demand from buy-to-let landlords.”