Remortgage loans reach new high
The mortgage broker firm said that homeowners were increasingly taking advantage of high house prices by releasing cash from their home.
In July the typical remortgage loan topped £170,000 for first time, with the loan size rising 2% compared to the previous month.
Rising property prices across much of the country meant the average value of a remortgaged home was £300,898 – the highest level for nine months.
Mortgage Advice Bureau said that this data suggested borrowers were deciding to cash in on property gains, rather than looking to decrease monthly repayments.
The loan-to-value for remortgage deals rose 1.1 percentage points, from 55.4% in June to 56.5% in July.
Brian Murphy, head of lending at Mortgage Advice Bureau, said those looking to remortgage and release cash needed to consider their long-term repayment strategy.
“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,” he said.
“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.”