Remortgage loans have reached a record high as homeowners cash in on rising UK property prices, new data has revealed.
The Mortgage Advice Bureau’s (MAB) National Mortgage Index showed yesterday that the average remortgage loan reached £170,094 in July -- a two percent increase from June’s £166,100 and the highest figure recorded since MAB began tracking this data in 2009. At the same time, the average value of properties put up for remortgage reached its highest in nine months at £300,898.
The data indicated that borrowers are opting to cash in on property gains rather than taking out loans to reduce monthly mortgage payments, the MAB said. “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,” said MAB’s head of lending Brian Murphy, adding that as a result, many homeowners are in “an ideal position” to use their property to release extra funds.
July’s number of remortgage applications jumped 35 percent year-on-year, as borrowers reacted to the prospect of an interest rate hike. Many of those applying to remortgage were more interested in a fixed interest rather than one linked to the Bank of England’s (BoE) base rate.
The BoE suggested in July that a decision on whether to raise interest rates would become clearer at the end of the year, with many expecting a rate rise in the first three months of 2016. But expectations of the first hike have since been pushed out to next summer as a dip in commodity prices impacts on inflation rates.
In addition, MAB’s data unveiled that purchase applications had risen by 26 percent in July, indicating that remortgage lending is set to strengthen in the coming months. However, Murphy said that a few high street lenders had increased their rates recently, suggesting “we may fast be approaching the bottom of the curve.”