The average remortgage loan has reached a new high as homeowners cash in on rising property values, according to the National Mortgage Index from Mortgage Advice Bureau.
The typical remortgage loan in July was £170,094: a 2% increase from June (£166,100) and the highest figure recorded since MAB began tracking this data in 2009. At the same time, the value of a property put up for remortgage reached £300,898: 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 rose 1.1 percentage points from 55.4% in June to 56.5% in July. Compared to the average LTV six months ago (54.9%), this is a 1.6 percentage point increase.
As a result of taking out higher loans, borrowers’ average housing equity has fallen 2% 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% higher (£141,984).
Brian Murphy, head of lending at Mortgage Advice Bureau, commented:
“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. 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.”