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Homeowners re-mortgage to make unconventional investments

Financially confident homeowners are increasingly borrowing against their property and taking a punt on commercial property, bonds and crypto currencies.

Low-cost debt brought about by interest rates of under 2% on two and five year fixed-rate home loans are fuelling a growing trend where well-off homeowners attempt to profit from alternative investments.

Until recently re-mortgaging was a way of raising money to purchase buy-to-let property or make home improvements, but house prices are slowing and taxes and regulations have put some potential landlords off expanding a rental portfolio.

Mortgage broker Largemortgageloans.com said they’d seen a 50% increase in borrowers taking out loans to fund investments since 2009.

Vicky Bibiris, a Partner at Location Location estate agency in Stoke Newington, said: “With interest rates so low, homeowners with equity who have some financial expertise are naturally looking to make their money work harder. They’re investing in everything from currencies like Bitcoin to bonds and private equity.  There has also been a surge in investments in commercial property, for which the top rate of stamp duty is 5%, compared with a top rate of 15% on higher-value residential rental properties."

“It’s definitely not without risk but the potential for large returns can be very attractive.”

According to one mortgage broker, a wealthy homeowner, whose home was valued at £10m took out a loan of almost £2m and invested it in the crypto currency Bitcoin. The value of Bitcoin has more than doubled this year. Others have borrowed against their homes to invest in shares, classic cars or fine wine.

Mortgage regulation doesn’t prevent someone borrowing against a property for personal investments, as long as the lender considers the loan to be affordable. Some lenders seek to moderate risk by limiting loans to less than 60% of the property’s value.

    “It’s definitely not without risk but the potential for large returns can be very attractive.”

    Posted 9th August 2017


    Vicky BibirisManaging Director

    Vicky started with Location Location as a junior negotiator in 2006 and within a short period of time became the top performing sales consultant in the company taking on the role of Branch Manager in 2009. Vicky's exceptional ability is backed up by her infectious enthusiasm for people and property, this led to her becoming Sales Director and equity partner in 2012. Vicky has been an integral part in establishing Location Location's reputation as one of North London's leading estate agents.