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Homeowners unlock extra capital when remortgaging their home

Nearly half of remortgage buyers are taking advantage of low interest rates by raising extra capital from their property.

The latest research from UK Finance reveals homeowners are unlocking £50,000 in extra capital from their homes when they remortgage to lower interest rates.

There were 5.9% more remortgage buyers releasing capital and 17,740 borrowing an average £185,118 with a loan to income multiple of 2.80, rising slightly from last year.

In comparison 19,140 remortgaged their existing loan to a new preferential rate without further capital release, borrowing £175,496 and this is 8.0% higher year-on-year.

Remortgage buyers have seen equity in their home reduce from 42.6% last year to 41.4% in September 2019 and average age of borrowers is 42 years old.

Mortgages are low cost option for cash

The cost of borrowing can be high and according to Moneyfacts credit card interest is an average of 19.99% pa, bank overdrafts at 18.55% pa and personal loans 7.89% pa.

Rising property values across the country now means homeowners can release capital at a time when mortgage interest rates are at historic lows and a five year fixed rate with 25% loan to value averages 1.96% pa.

There are risks to borrowing more as interest rates may rise in the future and if you cannot afford the interest repayments you may be at risk of losing your home.

With uncertainty over Brexit and the economy, home movers are delaying their plans and instead unlocking capital to improve their home such as a new kitchen, bathroom or extension.

For older equity release buyers, fixed rates of 3.0% upwards can be secure for a lifetime mortgage without any evidence of earnings which is important for borrowers with only pension income.

Equity release can be used for any purpose such as maintaining your lifestyle, holidays or purchase a new car with no need to make repayments and a guarantee you can stay in your home for your lifetime.

New purchases reduce this month

First time buyers account for about half of all properties bought with a mortgage although numbers have reduced -12.6% to 29,100 in September and lending values are -13.1% lower at £5.0 billion.

To get on the property ladder first time buyers need a mortgage of £174,223 and monthly repayments are 17.1% of gross household income with average deposits of 22.5%.

Home mover lending values are lower by -14.9% and numbers are down by a greater amount falling -13.5% to 29,050 possibly due to fewer suitable properties on the market in anticipation of an election.

Moving to a bigger home second steppers need a mortgage of £229,000 and monthly repayments are 17.6% of gross income with equity to property values of 32.8%.

There has been a slowdown in new purchases for buy-to-let investors down -3.5% at 5,500 as it is less attractive to buy due to changes to stamp duty and taxation allowance on mortgage interest.

What are your next steps?

Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or a buy-to-let investor.

Learn more by using the equity release mortgage calculator, mortgage cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.

For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to repay an interest only mortgage or pay for care at home.


Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.16% Fixed Rate
60% Loan to Value
£1,525 App Fee
Until 01/11/2022
Reverts to 4.09%
1.19% Fixed Rate
60% Loan to Value
£999 App Fee
2-Years Time
Reverts to 3.59%
1.18% Fixed Rate
60% Loan to Value
£1,034 App Fee
Until 31/10/2022
Reverts to 3.59%
1.17% Fixed Rate
60% Loan to Value
£1,025 App Fee
Until 31/09/2022
Reverts to 3.59%

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  • IMPORTANT

    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.

  • WARNING

    Equity Release - Equity Released from your home will be secured against it. Mortgages – Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured against it. Think carefully before securing other debts against your home. The information contained in this website is subject to the UK regulatory regime and is therefore intended for consumers based in the UK.

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