Britons using homes ‘ like a bank account’

Remortgaging frees up their cash

HOMEOWNERS are increasingly using their properties like a bank account by remortgaging to free up cash and make life easier.

The typical remortgage loan topped £170,000 for the first time in July – and applications were up by more than a third year on year.

Homeowners are rushing to remortgage to take advantage of good value fixed-rate deals amid warnings they are likely to disappear later this year.

The figures come from brokers Mortgage Advice Bureau (MAB), which said many people are also using the device to cash in on some of the increase in property values over the last five years.

Many homeowners who bought properties more than five years ago are rich in terms of bricks and mortar, yet do not have enough money in the bank for living day to day.

A study published last week found the number of millionaires in the UK has shot up by 41 per cent over the past five years, largely thanks to the increase in home values.

The MAB’s Brian Murphy 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. As a result, many homeowners are in an ideal position to use their property to release extra funds.’

Data from more than 700 brokers and 900 estate agents shows the number of remortgage applications in July was up 35 per cent year on year. The MAB said those remortgaging have increasingly opted for fixed-rate deals to protect themselves against rate rises. Some 89.7 per cent of these loans are on a fixed-rate basis.

Experts at Moneyfacts.co.uk found the average interest rate on a two-year fixed-rate in July was 2.76 per cent.

The average for three-year deals was 3.13 per cent, with 3.29 per cent on a five-year fix.

Mr Murphy said: ‘Mortgage rates have been tumbling since the beginning of the year, and many borrowers have jumped at the chance to secure a low-rate deal. However, a few high street lenders increased their pricing recently – suggesting we may fast be approaching the bottom of the curve.

‘Delaying too long could mean borrowers miss out on the change to shave significant amounts off their monthly repayments, so anyone looking for a mortgage in the near future would do well to get the ball rolling. Although not suitable for everyone, fixed-rate deals can protect against rising interest rates and extend the life of today’s record low rates.’

Lenders are reacting to Bank of England Governor Mark Carney saying the first official interest rate hike since 2007 could come at ‘the turn of this year’.

The Bank of England base rate has sat at a record low of 0.5 per cent for six years, leading many homeowners to become used to cheap mortgage deals.

Richard Woolhouse, chief economist at the British Bankers’ Association, said: ‘Savvy homeowners are snapping up competitive deals before an expected increase in interest rates.’

Figures from the Council of Mortgage Lenders showed the number of remortgage loans increased by 12.7 per cent in London to 11,600 between the first and second quarters of the year.

‘Ideal position to

release funds’