This represented an average debt increase of £34,000 per borrower.
According to the Council of Mortgage Lenders (CML), 280,000 home borrowers re-mortgaged in Q4 2006. LMS' research indicated that these borrowers collectively increased their debt by over £9.5 billion.
However, this phenomenal increase in spending power does not seem to be unleashing itself on the High Street. The overwhelming majority of borrowers are ploughing this equity back into the property market by either undertaking home improvements or helping children or grandchildren get on the property ladder themselves.
In Wales borrowing has increased the most at 53 per cent, showing that in the last full quarter re-mortgaging borrowers have significantly increased their mortgage burden by an average of £32,468. This is closely followed by the West Midlands at 46 per cent where the average increase per borrower has been over £33,000. The smallest increases have been in London and the South East at 23 per cent and 25 per cent respectively.
Notwithstanding, this massive increase in mortgage debt across the country has not encouraged people to overstretch themselves. The average income multiple in England and Wales is just over 2.9x income. This strongly suggests that scaremongers are somewhat unwarranted in their concerns regarding overstretched borrowers.
In East Anglia borrowing now stands at a 35 per cent increase but the average income multiple is the highest in the country at just over 3x income. Borrowers in this region are stretching themselves the most which may well be due to considerable increases in property prices in the region.
The regions with the joint lowest income multiple are the North West and Wales at 2.2x income. The actual re-mortgage amounts are still among the lowest in the country demonstrating there could still be room for further re-mortgage growth.
Dominic Toller, director of marketing & new business at LMS, said: “This re-mortgaging data demonstrates that borrowers are releasing large amounts of equity from their homes in ever-increasing numbers. Some regions have seen rates of borrowing double in the last quarter of 2006. This increase represents something approaching a £10 billion cash injection but not in the shops. Most re-mortgaging property owners are re-investing this equity in their homes or helping younger members of the family with deposits.
“Given this increase in borrowing it could be expected that people are overstretching themselves with 5x or 6x income mortgages. However, this LMS research shows that current income multiple borrowing levels are in keeping with historic trends at just short of 3x income when you look at the national picture.”
