Remortgaging became more popular at the end of last year as more borrowers looked to purchase second homes and buy-to-let properties.
According to UK Finance’s household finance review for Q4 2020, published today (March 4), the share of residential remortgages that had equity withdrawn stood at 52 per cent in H2 2020, up from 49 per cent in the previous half of the year.
The industry body said it had seen an increase in relatively large amounts of money withdrawn for purposes other than debt consolidation and home improvement.
According to UK Finance, it was likely that at least some of the equity was used to purchase a second property during the stamp duty holiday, such as holiday home or buy-to-let property.
Indeed, the industry body noted that Q4 2020 saw the highest purchase activity in the buy-to-let market (22,500 new loans) since Q1 2016 (49,100 new loans), when landlords looked to complete sales ahead of the introduction of the stamp duty surcharge on second homes.
Since April 2016 those buying a residential property in addition to one they already own have to pay 3 per cent on top of their normal stamp duty rates.
Richard Rowntree, managing director of mortgages at Paragon Bank, said the final quarter had helped the buy-to-let sector “recover some of the lost ground” from the early days of the pandemic.
He said: “I’m sure many in the industry would have feared a much worse result when the housing market was closed, so the bounce back during the second half of 2020 was encouraging, demonstrating the sector’s resilience and effective response to the pandemic.”
Rowntree added: “I anticipate that we will continue to see strong levels of house purchase activity in the first and second quarters of 2021 as landlords complete transactions ahead of the stamp duty holiday deadline.”
The stamp duty tax cut will last until the end of June, as announced in yesterday's Budget.
The nil rate band will then be set at £250,000 until the end of September when it will return to £125,000.
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