When shopping for a remortgage a homeowner will find out that their property’s equity has a lot to do with what level of interest rate is offered for their remortgage deal.  Equity is basically determined by taking the mortgage debt on the property and subtracting the value of the property.  The resulting amount is the equity that is built up in a property.  In usual economic situations, houses are rising in value and the homeowner is paying off debt at the same time which helps to increase equity levels.  However, in this economic environment homeowners are paying off debt, but their property values are dropping which in some cases is happening at a higher level than the debt being paid.  This is putting homeowners in a hard situation when it comes to getting the best remortgage deal.

According to the LSL/Acadametrics House Price Index average house prices fell by another 0.1 per cent in the UK in July.  This amounts to a decline of 2.6 per cent when compared to the average house price from last year.  There was an increase in property transactions for July of 5.0 per cent, but for the second quarter they fell by 5.9 per cent when compared to the same quarter last year.

David Brown, commercial director with LSL Property Services remarked about the report saying, “Lenders worried about the economic picture in the UK and beyond are reluctant to return to high-volume lending at high LTVs.

“But this hasn’t stopped lenders taking advantage of low interest rates to compete for market share of borrowers who are considered a safe bet.

“Below 70% LTV, there are now five year fixed rate deals below 3.4% and for many buyers’ stagnant prices and increasingly affordable mortgages make for great opportunities to lock into deals at an unprecedentedly low cost.”