It's Vitually Impossible to Remortgage

Home owners with equity of less than 15 per cent are finding it virtually impossible to find a new mortgage, new figures suggest.

The exclusive data, based on more than a quarter of a million remortgage valuations since 2007, reveals the full extent of the difficulties facing home owners looking to secure a new home loan.

At the height of the property boom in 2007, home owners did not need any equity in their homes to remortgage, with one in 20 borrowing more than the actual value of their home. It meant the money raised could be used for home improvements.

However, not only is now impossible for those already on the property ladder to strike the same deal, but they will need a deposit of at least 15 per cent.

Banks and building societies imposed strict lending criteria after the credit crisis and there are no signs that the trend is easing.

Lenders are demanding increasingly bigger deposits, with the figures from e.surv showing that half of all people who remortgage their home have equity of at least 25 per cent. It compares with just 19 per cent of people at the peak of the housing market in August 2007.

Today, 42 per cent of home owners who are looking for a new deal have equity of at last 40 per cent.

Just 8 per cent have a deposit of at least 15 per cent, compared to more than double that percentage at 21 per cent in August 2007.

Rising unemployment means lenders are concerned about borrowers’ ability to meet their monthly mortgage payments and are restricting the best deals to those with the largest deposits.
For many home owners, this has not been a problem as they have automatically slipped onto their lenders’ cheap standard variable rates at the end of their initial deal.
But with speculation that the Bank of England will raise interest rates as soon as next month, borrowers are keen to guard against an increase in their monthly payments by locking into a fixed rate.
The latest figures from the British Bankers’ Association showed an increase in the number of people remortgaging in January.
Richard Sexton, sales director at chartered surveyor e.surv, said: “With the Bank of England poised to raise interest rates, we expect a growing scramble from home owners to remortgage.
“But the best deals are not available to those who arguably need them most. For the last year and a half almost no-one needing more than 85 per cent loan-to-value has been able to refinance their loan, and the proportion of loans going to those needing between 75 per cent and 85 per cent loan to value has shrunk from a quarter to just one seventh.
“Only those with the lowest loan to values can be sure of securing the best deals. These are usually older, wealthier people. Because people in more expensive homes tend to have much more equity, built up as they traded up the property ladder, they can be much more certain of grabbing the cheapest rates. Younger borrowers who still have larger mortgages on cheaper homes are finding it much more difficult.”