Remortgage applications are set to double over the next three months as home owners use equity release to fund a boom in home improvements, says Amity Direct.
The company says high house prices are forcing homeowners to stay in their current properties and remortgage for home improvements instead.
Data from Amity Direct's four processing centres throughout Britain show that 53% of the mortgage applications they process are equity release remortgages intended for extensions, improvements, maintenance or other major purchases.
One in 10 homeowners currently finance improvements through remortgaging or a secured loan. Recent statistics by the Council of Mortgage Lenders show 50% of all activity in Britain's £270bn-a-year mortgage industry now relates to remortgaging.
The home improvement season starts at this time of year, and on previous experience Amity Direct is expecting that remortgage enquiries will double in the next three months.
Julie Hamilton, operations manager at Amity Direct, says: “Recently there has been a distinct shift in activity away from using mortgages to purchase property.
“As a packager, it is important to us to know what the loan will be used for, so that the company can tailor it in the best interests of our introducers. Amity has found that continuing high property prices are encouraging homeowners to hold on to their properties, and remortgage to increase the value of their homes through improvements.”
The increase in price from a three-bed semi-detached house to a four-bed detached villa can be as high as £200,000. But the average Amity Direct loan for home improvements is £20,000 for homeowners who want to build an extra room into their existing home.
Hamilton adds: “Building an extension is often a more affordable option than buying a bigger property. But borrowers should beware - while practical developments like a conservatory, loft, or installing central heating will add to the value of a property, cosmetic improvements like landscaping the garden will not.”