LMS mortgage index reaches second highest peak

The LMS Remortgage Healthcheck Index hit its second-highest reading for the fourth quarter of 2021, after rising 2.6 points on faster growth in average approval values.

The index, produced in partnership with CEBR, shows that the overall health check index reached 70.1.

This was mainly due to a 5.7 point increase in the borrowing costs indicator, reflecting a narrowing of the spread between mortgage rates and lenders’ funding costs.

The Home Equity and Remortgage Approvals indicators also increased during the quarter, by 5.3 and 2.9 points respectively.

This means the Home Equity Index hit a record high of 92 points, following the third quarter when the indicator posted its biggest ever increase since the same period in 2020. This was attributed to continued price growth housing.

The mortgage approvals indicator rose to 66.1 points for the quarter, reflecting an increase in the number and average value of mortgages.

Despite these positive movements, the LMS Borrower Sentiment index remained neutral at 58.6 after losing 2.2 points.

This is the index’s first fall into neutral territory since the first quarter of 2021.

LMS chief executive Nick Chadbourne said the drop in sentiment was “not surprising” given the rising cost of living, which forced the Bank of England into a recent rate hike.

Looking ahead, the chief executive says he expects mortgage activity to remain healthy throughout the year.

“That’s because the two-year patches that peaked in popularity when the housing market reopened in 2020 due to low interest rates are now starting to expire,” says Chadbourne.

“This expected pipeline of activity is linked to the ongoing energy crisis and the post-furlough labor market, so we expect these issues to play a role in the market over the course of this year as people repay for release equity.”

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