As a result of the rising prices, those who wished to remortgage saw a significant boost to their housing equity, putting them in good stead to access competitive mortgage products.
The average value of a house for remortgage rose to £304,514 in November, up 5.6% annually from £288,424. This is the highest amount seen since October 2014, positioning existing homeowners as the clear winners of the housing market recovery.
As a result of rising house prices, the Index showed remortgagers experienced an increase in housing equity from £127,180 to £134,360 over the past 12 months.
Brian Murphy, head of lending at Mortgage Advice Bureau, comments: “With a large portion of many people’s wealth tied up in their property, homeowners should ensure they are making the most of this asset. As house prices continue to rise, homeowners are benefiting from increased housing equity, enabling them to access competitive remortgage deals.
“Record low rates and high product numbers mean that many homeowners could benefit from switching their deal. People should not be deterred by the perceived hassle of remortgaging: in most cases it leads to lower monthly payments, better mortgage rates or shorter terms, making homeownership more affordable. The New Year is usually a time for reassessing personal finances, and mortgages should not be ignored in the process – make it a resolution!”
Two year tracker rate drops below 2% for the first time as product numbers climb
Homeowners are also benefiting from record low mortgage rates, as two year tracker rates dropped below 2% for the first time since the Index began tracking this data in January 2009. In November, the average two year tracker rate - according to Moneyfacts Average Mortgage Rate ™ - fell to just 1.98%.
Assuming the base rate remains the same, opting for a tracker mortgage could prove more cost effective than locking into a fixed rate. Based on November’s average remortgage loan size of £170,154, borrowers will pay £720 a month for a two year tracker mortgage, which is £58 a month cheaper than if they chose a two year fixed product with an average rate of 2.67%.
Even if the base rate was to rise by 0.5%, and tracker rates increased by the same amount (to 2.48%), borrowers would still be paying less each month compared to the average two year fixed mortgage (£762 vs. £778).
Although two year fixed rates have fallen faster over the past year – dropping by 77 basis points (bps) compared to 30bps for two year tracker rates – taking out a tracked mortgage remains more affordable as borrowers benefit from the rock-bottom base rate.
Average two year tracker in saves borrowers up to £68 compared to fixing a year before
|
Two Year Tracker |
Two Year Fixed |
|||||
|
November 2014 |
November 2015 |
Annual Difference |
November 2014 |
November 2015 |
Annual Difference |
|
|
Average rate |
2.38% |
1.98% |
↓30bps |
3.44% |
2.67% |
↓77bps |
|
Monthly cost |
£753 |
£720 |
↓£33 |
£846 |
£778 |
↓£68 |
|
Total cost |
£226,025 |
£215,912 |
↓£10,113 |
£253,783 |
£233,323 |
↓£20,460 |
Mortgage product numbers also reached a new post-recession high of 16,879 in November, showing sustained growth for 10 consecutive months. The total number of products has risen 37% in the past year, up from 11,909 in November 2014. As a result, consumers now have a much wider product choice and better chance of securing a suitable deal.
Brian Murphy, head of lending at Mortgage Advice Bureau, comments: “For those who opted for a two year tracker, the decision has certainly paid off as the base rate is still at an all-time low. Typical tracker rates have dropped significantly over the year and remain lower than fixed rates. However, there is always the risk of rates changing and many borrowers will prefer the security associated with fixed mortgage payments.”
