The LMS Remortgage Index rose by 9.6 points to stand at 64.4 in Q1 2021, marking the highest reading since Q2 2015.

Additionally, bar the temporary bounce-back in Q3 2020, this rise represents the strongest quarterly gain in the overall index recorded since Q2 2013.

All four sub-scores of the index recorded quarterly increases, though the main drivers behind the uptick were the remortgage approvals and borrowing costs indicators.

LMS believes this was driven by consumer appetite to lock in low mortgage rates and a fall in interest rate spreads between lenders and borrowers, indicating that banks are competing more actively for new borrowers by lowering their rates.

The Remortgage Approvals indicator surged by 12.9 points to stand at 69.4.

This is close to the all-time high recorded in Q3 2020 as the economy opened up again following the first national lockdown.

This strong performance comes despite continuous low approval numbers from lenders, which seem to have found a new plateau at around 100,000 per quarter.

The rolling three-month average has increased only marginally over the first quarter, rising to 102,002 up from 101,857 in Q4 2020.

This is compared to a three-month rolling average of 151,736, from December 2019 to February 2020, the last recorded “pre pandemic” figure.

According to LMS, the increase in the indicator is almost solely driven by higher average approval values.

The Borrowing Costs indicator improved by 18.4 points in Q1 to 59.6, the highest value since Q1 2020.

Mortgage rates for 2- and 5-year fixed rate mortgages decreased over the first quarter, while standard variable rate mortgages remained largely stable.

As well as this, 10-year fixed rates rose slightly between Q4 2020 and Q1 2021.

Both the lower mortgage rates and the narrowing spreads are helping to reduce borrowing costs for consumers.

The Homeowner Equity indicator recorded a marginal increase in the first quarter of the year, rising by 0.8 points to stand at 74.7.

Indicator growth came as house prices remained on an upward trend during the first three months of the year, although price growth slowed slightly towards the end of the quarter.

The Borrower Sentiment indicator recorded a second consecutive increase in Q1 2021, rising by 1.8 points to 59.1, a new all-time high.

The increase was driven by better scores for consumer confidence and borrower sentiment, likely caused the speedy vaccine rollout and the government’s roadmap to loosen social distancing restrictions, noted LMS.

Each indicator is scored between 0 and 100, with scores between 40 and 60 considered neutral, a score below 40 considered negative, and score over 60 seen as positive for the industry

Nick Chadbourne, chief executive at LMS, said: “Q1’s remortgage market was particularly strong, showing growth in all indicators and with the overall score hitting its highest value since Q2 2015, one year before the Brexit referendum which caused widespread uncertainty in the housing market.

“The strong Borrowing Costs indicator score is especially promising.

“Borrowing Costs measure the gap between lenders’ own funding costs and the interest rates they charge to borrowers, and the rising score means lenders are passing their reduced costs to borrowers, signalling a positive outlook for the future as lenders fight for market share and borrowers feel the benefits.

“Concurrently, rising house prices across England and Wales continue to drive positive scores in Homeowner Equity and Remortgage Approvals.

“Rising house prices put homeowners in stronger equity positions and while approval numbers have plateaued since the beginning of the lockdown in Q2 2020, lenders are continuing to test the waters with larger loans, pushing the Remortgage Approvals indicator up.

“Looking ahead to the rest of Q2 2021, we will see the continued impact of government support schemes such as the Stamp Duty Land Tax holiday extension and government-backed 95% LTV mortgages.

“The extension of these schemes will continue to fuel house price growth across the majority of England and Wales, supporting Remortgage Approvals, driving up the Homeowner Equity score and contributing to healthy Borrower Sentiment, pointing to a continued healthy remortgage market for the remainder of H1.”