Homeowners opt to unlock equity when remortgaging

remortgaging in December opted to take on more debt, marking the seventh month in 2019 in which those unlocking equity outnumbered those who did not.

But there was no sign that homeowners were overstretching themselves, with the average loan-to-value ratio of people remortgaging increasing only slightly to 58.8%.

On the one hand, the number of people unlocking equity suggests homeowners are feeling confident about the outlook for the property market and are not concerned that house prices may fall in the near future.

At the same time, it is also likely to reflect a growing trend for existing homeowners to use equity in their property to fund extensions or other home improvements as an alternative to buying a new home and incurring all the move costs, including stamp duty.

Finally, the high levels of competition in the mortgage market, particularly during the final quarter of the year when banks and building societies are looking to meet their end of year lending targets, is likely to have tempted homeowners to take on more borrowing.

The fact that people feel optimistic about the property market is good news, as it suggests those who had been delaying making a purchase until the economic and political outlook was clearer will now go ahead with one.

But it is less positive that homeowners appear to be opting to stay put and improve their current property rather than trade up the housing ladder.

One of the factors that has been holding back transaction levels in recent years has been the shortage of homes for sale.

The property market needs existing homeowners to trade up the ladder and sell their current home to make properties available for those lower down.

The UK Finance figures also showed a jump in people buying a home, as well as those remortgaging.

A total of 29,400 existing homemover mortgages were approved during the month, 3% more than a year earlier.

At the same time, mortgages were also advanced to 29,490 first-time buyers.