Home owners with only small amounts of equity in their home who want to improve rather than move could now have more options when refinancing their property.
That’s because a building society has increased its maximum loan-to- property value (LTV) at which borrowers can re-mortgage, from 90% to 95%.
Yorkshire Building Society has launched two, three and five-year re-mortgage options for people with just 5% equity in their home.
Previously, re-mortgage options were only available from the building society for borrowers with at least 10% equity.
The move promises to help widen the choice of re-mortgage deals for those with limited equity.
Research from financial information website Moneyfacts.co.uk found less than a quarter of the mortgage deals on the market generally for people with 5% equity are available to re-mortgage customers.
The building society said the new loans could appeal to home owners looking to raise capital to improve their home rather than move.
Some borrowers who have previously taken out low-deposit mortgages under the Help to Buy scheme may also be interested in the loans if they are looking for new borrowing options.
Home owners living in areas which have not seen much house price growth to help boost their equity position may also be attracted by the new offers.
The new range of home loans available for borrowers remortgaging at 95% LTV includes a two-year fixed-rate mortgage at 3.34%, a three-year fixed-rate mortgage at 3.59% and a five-year fixed-rate mortgage at 3.79%.
The mortgages in the range have no completion fee, free legal fees and a free standard valuation.
Janice Barber, mortgage manager at Yorkshire Building Society, said: “This new range of mortgages gives borrowers with minimal equity in their property, or those looking to raise capital, more flexibility when it comes to refinancing their home.
“With the current uncertainty around Brexit and a slowing down of the housing market, home owners could be more tempted to improve their home rather than move.”
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “It’s fantastic to see support for borrowers looking to re-mortgage who may have limited equity to switch deals.
“Our own research of residential fixed rates at 95% loan-to-value shows that less than a quarter (22%) of deals are available to re-mortgage customers.
“Economic uncertainties could well change the views of home movers and instead, they may want to improve their existing property and stay put.
“Not only this, but borrowers who are looking to refinance on a good deal could be looking at their options, particularly if they are worried interest rates will rise in the future.
“All three deals are competitively priced and sit in the top half of the market for re-mortgage customers at 95% loan-to-value, plus the generous incentive package will also help borrowers save on the upfront cost.”
