Remortgage loans have reached a new record in July 2015 as homeowners are looking to take advantage of the growing property values, according to the latest National Mortgage Index from Mortgage Advice Bureau (MAB).
The average remortgage loan size has exceeded £170,000, which is the highest level since records began in 2009, MAB said.
At the same time, the value of a property put up for remortgage reached £300,898, which is the highest value seen in nine months (October 2014 – £305,592).
The data indicates rather than take out smaller loans – and decrease monthly mortgage repayments – borrowers are opting to cash in on property gains.
The average remortgage loan-to-value (LTV) rose to 56.5 per cent in July from 55.4 per cent in the previous month. Six months ago the average LTV stood at 54.9 per cent.
As a result of taking out higher loans, borrowers’ average housing equity has fallen 2 per cent over the past six months, from £133,718 in January to £130,804 in July. This is also a significant annual fall from July 2014, when the typical remortgage equity was £11,180 or 9 per cent higher (£141,984).
Brian Murphy, head of lending at Mortgage Advice Bureau, comments:
“Homeowners have benefited from significant house price rises in recent years. For example, someone who bought their house five years ago may have seen the value of their home soar by almost a third, according to the Office for National Statistics (ONS). As a result, many homeowners are in an ideal position to use their property to release extra funds.
“However, opting for a higher LTV means borrowers may have higher monthly mortgage repayments to contend with – and could end up paying more over the full duration of the loan. Borrowers coming to the end of their current mortgage deal will need to decide whether to prioritise reducing their overall mortgage debt or releasing cash for the here-and-now.”
