The number of property owners renegotiating the finance on their homes spiked in the first three months of 2019.
Owners have been keen to lock in on the currently still-low interest rates – and take out some additional borrowing for home improvements (and other purposes).
In March 2019 there were 16,180 new remortgages with additional borrowing, which was a 9.1 per cent increase on the previous year. The average amount of additional cash borrowed on top of the mortgage amount was £55,700.
Savings to be found
With rates nearing rock-bottom given the intensity of competition among lenders, remortgages have gone off the Richter scale. Andrew Montlake, director of the UK mortgage broker Coreco
Borrowers who signed up for two-year fixed rate mortgages in 2017, when the average interest rate was 2.30%, could see the cost of their borrowing more than double if they revert to their lender’s standard variable rate (SVR) when their fixed term ends this year.
Standard variable rates are currently averaging around 4.89%. Remortgage rates are available from 1.5% for another two-year fix.
Planning ahead
On-the-ball borrowers will be researching their remortgage options well in advance of their fixed-rate term ending, to avoid spending even one month paying their current lender’s SVR.
The rise in additional borrowing may be due to Brexit-related uncertainties about the direction of the property market, and owners deciding to improve rather than move.
There may be further mortgage-rate savings to come, with a surge of remortgaging expected in October 2019.
The significant increase in motivation for borrowers to switch mortgage deals, and the… potential increase in remortgage business… may push some mortgage lenders to marginally cut rates over the next few months to maintain a competitive edge. Darren Cook, finance expert at Moneyfacts.co.uk
What can you use additional borrowing for?
Some lenders specify that additional borrowing on a mortgage can only be used for home improvement purposes, and will require evidence of costs.
Others take a more flexible view, and their agreement to additional lending will depend only on their assessment of your ability to repay.
Landlords are also remortgaging
Landlords are scaling back on their portfolio expansion plans, in response to changes in tax relief on buy-to-let mortgage repayments.
The shift in focus from portfolio expansion to financial strength has driven a surge in buy-to-let remortgaging. John Heron, director of mortgages at specialist mortgage lender Paragon
But mortgage costs as a proportion of rental income are currently lower than in recent years: down from 30% at the start of 2017 to 27% in 2019 – helped by landlords remortgaging onto lower interest rates and longer fixed-term mortgage deals.