Remortgaging could be on the rise

Thursday 26 September 2019

Changes to Guernsey's legislation to lower the costs associated with mortgage lending have resulted in a significant increase in lending rates, according to latest figures for largemortgageloans.com.

The value of non-property purchase bonds registered at the Greffe has increased by 88%, while the number of non-property purchase bonds has increased by 40%.

Non-property purchase bonds are bonds registered at the Greffe which do not relate to a new property purchase, but can correlate with remortgaging or taking out a mortgage against an existing property as a form of equity release.

Last year, largemortgageloans.com launched a successful campaign in Guernsey to abolish document duty on bonds. Pre-2019, every new mortgage or remortgage registered at the Greffe required homeowners to pay the States a fee of 0.5% of the home's value. However, following the public campaign and consultation with politicians, that cost was waived from January this year and replaced with a system of increased document duty on higher value homes.

"The campaign we created set out to free islanders from being mortgage prisoners and allow them to shop around for the best deal without having to pay a hefty fee to change lender," said Founder and CEO of largemortgageloans.com, Paul Welch. "We also believed it would benefit people who don't have a mortgage, but who want to take one out to release equity in their homes, as there would be no surcharge of 0.5% of the loan value in order to do so.

"Unfortunately, the figures recorded don't specify if the non-property purchase bonds relate to a remortgage or homeowners releasing cash built up in the value of their homes. However, the very nature of the system means that the majority of these transactions will relate to one of these two, proving that the campaign has been a resounding success."

President of the Policy & Resources Committee, Deputy Gavin St Pier, added:

"We were persuaded that the bond fee created friction in the marketplace which impeded borrowers from switching to find better deals. It is encouraging that the statistics since the bond fee was abolished seems to bear that out. Anything which helps to lower to borrowing costs for Guernsey households is to be welcomed." 

Pictured top: Paul Welch.