Remortgages Remain Out of Reach of Many Homeowners
Homeowners are finding themselves stuck in their present deal with their current mortgage lender and unable to remortgage for the attractive deals currently being offered. This is due to the lack of equity in their property keeping them from securing a remortgage deal. House prices are continuing to fall which means values are declining of homes already occupied. This erases any equity currently built into the property. Without adequate equity a homeowner cannot remortgage and few lenders will allow them to move to another deal while equity remains low.
Until house prices begin to rebound there will be a problem for homeowners. Even with lenders offering high loan to value deals many are finding it hard to secure a deal, especially those homeowners that purchased in the last five years. According to Zoopla.co.uk, their data reveals that on the average 80 per cent of homes sold in the last five years are worth less than the price for which they were purchased. If value is falling below the level of a homeowner’s current mortgage they not only have lost what little equity they have built up, they are also in negative equity.
Many homeowners have moved onto their lender’s standard variable rate which can be changed by the lender at their discretion even if the Bank does not increase the standard base interest rate. This is a risky mortgage to be associated with and yet few homeowners can move from it due to their lower equity level.
Melanie Bien, director at independent mortgage broker Private Finance, commented, "Most lenders have reduced the maximum loan-to-value they will allow on remortgages, with even existing customers struggling to move on to a new fix or tracker. If you can't remortgage, you're effectively stuck with your existing lender, usually on its standard variable rate, which may be competitive or not, depending on the lender as it is set at its discretion."