Remortgages now '7.2% higher'

Homeowners are taking out remortgages that are worth 7.19 per cent more than last year, according to research by a comparison website.

According to the Moneyextra website, the average remorgage is now worth £122,541, despite four rate rises since August that have seen the base rate go up one per cent.

However, the rise does not reflect higher spending but rather a need for homeowners to re-fix their mortgages as their introductory offers run out, as well as getting in before another expected rate rise.

According to Robin Amlot, senior editor at the website, there was also evidence that borrowers are seeking to use their equity to pay off other debt.

Mr Amlot added: "It seems many people are opting to switch expensive credit card debt and overdrafts into long term low interest rate mortgage debt.

"Of course, this does mean they could be paying far more interest in the long run but it is one way of reducing immediate monthly outgoings."

Meanwhile first-time buyers are also looking to borrow more, with their applications asking for 8.9 per cent higher loans than last year. But the mortgages they received only grew by 2.9 per cent.

There is also evidence that home buyers are less likely to seek repayment mortgages than they were in 2003, according to Paragon. Their market share has fallen from 70 per cent to 58 per cent.

Interest only mortgages, by contrast, have grown from 11 per cent of the market to 26 per cent. This reflects the growth of buy-to-let investors.