MAB: My home is a cash point
Mortgage Advice Bureau research claimed that a combination of rising house prices and rock bottom mortgage rates was prompting homeowners to release an average of £9,000 of equity from their homes.
The firm said the typical customer looking to remortgage in Q1 2015 had a home worth £248,191, up 7.9% from £230,100 in Q1 2014 – giving people an extra £18,091 of property equity.
The broker firm suggested that rather than leaving the extra £18,091 of equity in their home and letting rising prices reduce their borrowing as a percentage of the property’s value, homeowners are instead looking to cash in some of their equity gains by remortgaging to borrow £9,069 more on average than a year ago.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “The fact that many people’s properties have gained in value over the last year offers some the chance to take the same percentage loan that they would have done if they remortgaged 12 months ago and give themselves a significant cash boost.”
As well as seeking bigger loans Murphy said customers looking to remortgage are also increasingly keen to stretch their repayments over longer terms.
While 76% searched for a minimum 25-year loan term in Q1 2014, this increased by ten percentage points to 86% in Q1 2015, he said.
He added that the percentage of customers citing past credit difficulties when searching for a purchase mortgage dropped from 3% in Q1 2014 to less than 1% in Q1 2015.
There was an even bigger shift among remortgage customers, where the percentage reporting past difficulties dropped from 6% to less than 1% over the same period.
Murphy said this trend suggested that fewer customers with past difficulties have been motivated to seek a new loan since the Mortgage Market Review took effect in Q2 2015 – or that those in this situation are less included to disclose an imperfect credit history when investigating a mortgage deal online.
Speaking at the HSBC Great Housing Market Debate earlier this week Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said: “The people who are being excluded from this market is not the 4% to 5% that the Financial Services Authority said would be the case under MMR.
“The intermediary and broker community know it is considerably more than that – somewhere between 25% and 40% would be excluded under MMR if they came to market and had the confidence to ask for a mortgage.
“Many millions of mortgage customers are afraid even to ask if they can get the mortgage that they currently have from another lender.”