HELP::: REMORTGAGING V EQUITY RELEASE

can someon explain to me the difference between remortgaging and equity release. I always though they were the same thing.

From the Property Times (April 1, 2004)

"Figures from the Council of Mortgage Lenders (CML) showed that mortgage lending slowed down in February... The CML said a total of £20.1 bn was advanced during the month (February)....the report revealed that lending to people buying a property was down slightly at £ 9.8 bn accounting for 49 % of total lending, while remortgaging accounted for 41 % and equity release for a further 8 % "

are these mortgage lending figures historically abnormal ? in the past (1950 s - 70s ) would it have been normal for remortgaging and equity release to account for 50 % of all mortgage lending ?

Reply to
sam1967
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They are sometimes used synonymously, but strictly speaking "remortgaging" is nowadays used to refer to redeeming your loan with one lender and transferring it to another one, usually in order to take advantage of a more favourable rate of interest, without necessarily borrowing more.

Equity release is increasing the size of your loan, without necessarily switching lenders. If done without switching lenders, it's usually called "taking a further advance".

Often both are done together.

Reply to
Ronald Raygun

I am bit confused because the article stated that 41 % (£ 8.2 bn) of hte lending was for remortgaging yet you just stated that most remortgaging didnt involve extra borrowing. PS Be patient as I have *ZERO* practical experience in this field and just go on what I read from those who have.

Reply to
sam1967

Exactly. If Mr Borrower, who has a £50k loan from TSB at 5%, and sees that he can get it for 4% at Lloyd's, now switches lenders, so that after the event he will owe £50k to Lloyd's instead of to TSB, then this will show up in the statistics as £50k worth of "remortgage" advance, i.e. as part of the 41%. There has been no "borrowing more".

If he had at the same time increased his borrowing to £60k, then the additional £10k would show up in the "equity release" figures, i.e. as part of the 8%.

Is that any clearer?

So none of those £8.2bn are really "new lending", since for each pound of "remortgage" which the new lender lends to the borrower, the borrower pays that pound off to the old lender. The total amount of money which all lenders put together have lent to all borrowers put together does not change in a normal remortgage transaction, it simply gets shuffled around from one lender's account to another's.

For that matter, most of the £9.8bn of "lending to people buying a property", isn't new lending either, since each sale will usually involve the seller paying off a loan too. In this instance, though, the new loan will probably tend, on average (these days) to be bigger than the old one being paid off. So *some* (but nowhere near all) of the £9.8bn is new lending. But all of the £1.6bn of "equity release"

*is* new lending.

The £20bn figure is just "funny money", it's not all new money, most of it is just money going round in circles.

Actually, all of it is, it's just a question of diameter. :-)

Reply to
Ronald Raygun

thanks for that.

Reply to
jsa

Except that each time it goes around, the banks charge another fee.

Reply to
Gareth Rees

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