Summary:
- Almost half (48 per cent) of all homeowners have switched lenders at some point, with 52 per cent of these people doing so in the past five years
- For those people who haven't yet switched lenders, it's clearly top of mind, with just under two thirds (65 per cent) saying they would consider doing so this year
- Lifestyle changes have started to be funded by re-mortgaging, with four per cent using this as a way to start a new business, or give up work and take time out, or start a family
The CML figures revealed that in the first quarter of 2005, the average number of home loans specifically for people remortgaging accounted for 48 per cent of all home loans, compared with 43 per cent in 2004. Whether this signals a return to the heady days of re-mortgaging in early 2003 remains to be seen, when it peaked at 51 per cent of all home loans as short-term fixed rate mortgage deals were at an all time low.
Research from Abbey shows just how many homeowners have switched lenders to obtain a better deal, with 40 per cent having done so at least once in the last five years, and 11 per cent having re-mortgaged twice in that period. In Wales and the north east, two per cent of homeowners have re-mortgaged three times in the last five years. And, in London, one per cent have re-mortgaged four times. Overall, Yorkshire sports the highest number of people who have re-mortgaged at some point (59 per cent) against a national average of 52 per cent over the past five years.
Most people remortgage to get a better mortgage rate and reduce monthly payments (66 per cent). However, many people have also re-mortgaged to borrow more money against the property (19 per cent), and others have done so to obtain a mortgage with more features, such as a flexible mortgage, so that overpayments and underpayments can be made in the future (8 per cent). Two per cent have switched because they were unhappy with their existing lender.
Remortgaging to release equity is also a popular move, with one fifth (19 per cent) having done this. Of these people:
- Just over one third (36 per cent) raised money for home improvements
- 16 per cent consolidated debts
- Five per cent used the money to buy another property
- A further five per cent used the money to buy a car
- More than four per cent re-mortgaged to change their lifestyle and career by either using the equity to finance a new business, giving up work before changing career or starting a family
- Three per cent re-mortgaged in order to fund a holiday.
Remortgaging, however, is not for everyone (52 per cent). When asked why they wouldn't consider re-mortgaging, 19 per cent were happy with their existing lender and one in ten (10 per cent) had a good mortgage rate at the moment. Nine per cent, however, are tied-in to an existing mortgage deal and would have to pay a penalty if they switched lender. Others think it's too expensive to re-mortgage (3 per cent) and a further three per cent simply can't be bothered and feel the process is too time consuming.
The majority of respondents thought they had a standard variable rate mortgage at the moment (37 per cent), followed by a fixed rate mortgage (32 per cent) and tracker mortgage (13 per cent). But when asked which type of mortgage they felt they would go for if they re-mortgaged, 38 per cent said they didn't know, 20 per cent said a fixed rate mortgage and eight per cent a tracker mortgage. Nine per cent, however, thought they would go for a standard variable rate mortgage.
Gary Hockey-Morley, Abbey's Director of Mortgages, said: "More and more people are now re-mortgaging to help them change their lifestyle or career and to own their own home quicker, not just to reduce their monthly repayments. Some people still feel that it's too expensive to re-mortgage although actually it needn’t cost a penny. I'd urge anyone considering changing their mortgage to talk to lenders, like Abbey, who have deals that offer free legal and valuation fees as well as good rates".
