More homeowners are staying put and making improvements to their home rather than moving house, a trend which is creating a surge remortgaging.
The number of remortgages, where people were borrowing additional money, jumped by nearly 20% in May compared to the previous year, according to UK Finance.
But, at the same time, people taking out new mortgages to move to new homes fell by 1.2%, a symptom of the subdued house price market.
Indeed, the latest house price data from the Land Registry, which was released today, revealed prices increased by in May 0.1% since the previous month and 1.2% over the year.
Remortgaging boom
Gemma Harle, managing director of Quilter Financial Planning’s mortgage network, said the dramatic hike in remortgaging figures was likely to be down to people deciding to stay put and lock into new deals while interest rates were at historical lows.
“This is a trend,” she explained, “which we can expect to see a continuation of until we get certainty over Britain’s relationship with the EU and we know who the next prime minister is and understand their approach to housing.”
Instead of moving to new homes, it would seem homeowners are remortgaging with additional borrowing so they can pay for extensions or renovations to their current homes.
Andrew Montlake, managing director of mortgage broker, Coreco, said people were using the uncertain climate to add value to their existing homes rather than moving house.
“With mortgage rates so low, many people see extending and renovating their existing homes as a strategic move,” he said. “They’re playing the percentage property game.”
Why ‘now’ is the time to remortgage
While the latest remortgaging figures show a rise in the number of people taking out additional borrowing, there was also a hike in homeowners switching to new deals.
In fact, those making straight remortgages, purely to move onto a good rate and avoid falling onto their lender’s default rate, were also at nearly 20% more than the previous year.
According to Yorkshire Building Society, the biggest mortgage maturity period of the year is due in October. This will see a peak in numbers of two-year and five-year mortgage deals coming to an end.
And it is urging people to start looking for deals now because competitive rates, combined with high house prices, will be beneficial to homeowners remortgaging.
Charles Mungroo, senior mortgage manager at Yorkshire Building Society, said they expect to see a surge in remortgage applications as many homeowners start considering their next steps.
He said: “Borrowers maturing from a five-year fixed rate in particular may be pleasantly surprised to see they potentially have more competitive rates available to them now, especially in areas of the UK where house prices have risen.
“All our mortgage offers are valid for six months so homeowners could choose a new rate now and have the reassurance their home loan is arranged when their current deal ends in October.”
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