More than two-thirds (66 per cent) of people remortgaging in June did so to take advantage of the low interest rates, the latest figures from outsourcing property services specialist LMS show.
Homeowners were not only looking to land a better deal but were also keen on releasing some extra cash. More than a third of remortgage customers (35 per cent) increased the size of their loan in June, up by 4 percentage points from May, the research reveals.
Encouraged by the record-low rates and improving affordability, borrowers released record amounts of equity from remortgaging. The average amount per borrower hit £34,500 in June, which is almost a quarter of the value of the average remortgage loan size (£150,726).
The need for extra funds suggests that the economic growth is still not filtering down to many households in the UK.
Home improvements were the most preferred thing on which to spend the money released from remortgaging as 71 per cent of borrowers, who increased the size of their loans in June, used at least part of the cash for that. Debt consolidation was another common thing to use the extra money on with almost a third (31 per cent) of borrowers choosing that option.
Around half (49 per cent) of customers changed their deal because it was expiring.
The proportion of borrowers switching their lender when remortgaging continues to grow. In June, it reached 80 per cent, climbing by 5 percentage points on the previous month.
Andy Knee, Chief Executive of LMS, comments:
“As we reach the heights of summer, remortgage lending is gradually creeping up, and record low interest rates have compelled borrowers to go out and seek better deals other than those offered by their existing lenders.
“Whether it is to repay debts or enjoy themselves during the holidays, the fact that families need to free up cash within their property, rather than using their own savings, implies economic improvements are still to register for many people. In such a situation, even a minor increase in the interest base rate – as indicated to occur before 2016 by Bank of England governor Mark Carney earlier in the month – is bound to put a squeeze on pockets and borrowers need to prepare themselves.
“An improved economy and wage growth in recent months, are all signals for a tighter monetary policy in the near future. Now is therefore the perfect time to remortgage. It’s important for borrowers to shop around and seek advice on the best new deals currently available in the market before these potentially come to an end later on in the year.”
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