The act of re mortgaging one’s house should never be taken lightly – after all, one is playing with the very roof over one’s head. Never the less, it can be a useful tool in obtaining more capital with which to make investments, or to use to raise more cash in another way.
January was a particularly strong month for re mortgaging, accounting for 49% of all mortgage borrowing according to the British Bankers’ Association. To add to this, general mortgage lending rose slightly despite the fear-culture that has arisen since the global credit crunch hit last year.
In terms of raw statistics, the value of approved mortgage loans rose 4.6% in comparison to the same month in 2007, and also rose from £17.3 billion in December to £19.6 billion in the following month. Stats guru David Dooks commented that “Although house prices and new loans for house purchase, appear to be subdued as the housing market slows, the strength of re mortgaging would suggest competition for mortgage business and switching remains high.”
The nature of the re mortgages being offered is changing also: whilst mortgage broker John Charcoal said that there were still lenders offering up 95 to 100% mortgages, the re mortgage for up to 75% is seen as the king of the market at the moment. This unwillingness on the banks’ part to offer out good deals on first mortgages perfectly places the would-be re mortgager to go ahead and fish for the optimum deal in the market place.
In addition, the figures for re mortgages dwarf that of home sales. In terms of the former, there was only a 2,000 jump from December to January in home sales. Re mortgages saw a jump of well over 22,000, suggesting that home owners are seeking to unlock the financial clout in their homes to try and flex greater fiscal muscle in other arenas.
The figures do not make happy reading for those seeking to buy their own home. Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, said “While first-time buyers may be struggling to find finance to get a foot on the residential ladder, there are increasing opportunities to refinance for those who already own property.” The historic lows of first-mortgage approvals in May 1995 – just 71,000 – do not seem far off: January saw just 74,000 buyers finding their first home, up from a pitifully low 72,000 in December 2007.
Net lending for homes is predicted by Hometrack to fall by 18% during 2008 to £85 billion. This will impact first time buyers even more – if the banks are keeping their purse strings more tightly drawn in anticipation of stormy waters ahead, their pleas for credit may go unanswered. Nothing is certain in the murky world of home buying, but if anything is certain then the coming year is going to be as unpredictable as ever. Batten down the hatches and prepare for a rough ride, whatever ship you’re traveling on.
Jack is an author of several articles pertaining to Mortgages. He is known for his expertise on the subject and on other Business and Finance related articles.