Broker warns against remortgage and spend over Christmas

Andy Frankish, a Director at Rotherham-based Mortgage Talk, the North's

largest mortgage broker in the Legal & General network, is advising

consumers in general, and homeowners in particular, to exercise caution over

their spending this Christmas. And Frankish believes that some homeowners

are encouraged to borrow and spend by a credit industry that should know


'In the run up to Christmas, I have seen a number of comments from mortgage

brokers that are clearly trying to persuade homeowners to remortgage, simply

so they can borrow money that will be spent over the festive period. While

I'm certainly in favour of everyone having an enjoyable and worry-free

Christmas, I'm concerned that people should think very carefully about the

implications before remortgaging or taking out a secured loan to fund their

seasonal spending,' says Frankish.

'Some brokers have rightly pointed out that, with mortgage interest rates at

their lowest for thirty years, it is far cheaper to borrow money against

your property than to take out an unsecured loan or buy on a credit card.

However, while this might seem like common sense on the face of it,

consumers should be more aware of the total cost of the interest repayable,'

he warns.

Frankish believes that homeowners should resist the temptation to remortgage

to fund spending. Instead, he argues that borrowers are better advised to

switch home loans purely to save on their monthly repayments. 'There are

some excellent fixed rate and discounted deals available at the moment, and

homeowners should consider carefully the merits of changing their lender in

order to reduce their monthly outgoings. But, anyone that increases the

amount of their home loan without ploughing the money back into their

property is potentially eroding the equity available in their home. And this

is a dangerous route, especially if interest rates increase in the future,'

he argues.

'Borrowers have to realise that a period of low interest rates isn't an

excuse to borrow up to their monthly limit, and that they must budget for

the possibility of an increase in repayments at some time in the future. My

recommendation to everyone is to look closely at the monthly interest rate

charged on their credit cards, and to seriously consider swapping providers

if there is a cheaper deal available elsewhere. But, borrowers should

remember, at all costs, not to overstretch themselves financially -

otherwise Christmas cheer could be replaced by January gloom,' Frankish