Homeowners are “repatriating” millions of pounds of equity from their second properties in Europe to take advantage of the strong euro, the government’s recent capital-gains tax (CGT) changes, and to protect themselves from the global credit crunch.

Brokers report a 40% jump since September in the number of people remortgaging second homes to raise cash which they can set against their UK properties. This will help them to get a better deal in Britain as lenders tighten their criteria.

There has also been a surge in selling as homeowners seek to cash in on the 18% rise in the euro against the pound, which means a €200,000 property sold for £136,000 a year ago would now fetch £160,000, an increased profit of £24,000.

The government’s CGT changes have exacerbated the trend — since April 6, profits from the sale of a second home are taxed at 18% compared with a minimum of 24% for higher-rate taxpayers before. This applies to overseas as well as UK properties, though there may also be tax due in the foreign country.

Meanwhile, banks are clamping down on buyers amid fears that the credit crunch is spreading to Europe. For example, Banco Halifax, the Spanish division of Britain’s biggest lender, has increased the minimum deposit required from 30% to 40%, adding about £16,000 to the typical euro mortgage of €200,000. It has also cut the maximum it will lend to borrowers from €2.5m to €1m.

The soaring euro is also making life difficult for prospective buyers. Foreign Currency Exchange, a broker, said 10 clients a day are backing out on overseas purchases, often because they are being forced to find a bigger deposit due to the weak pound. In the past eight months alone, a €200,000 property has become £27,690 more expensive, according to foreign-exchange firm HiFX.

Brokers fear the trend will hit prices in hotspots that have been popular with British buyers. Regis Grant, of forex specialist Baydonhill, said: “There has been a huge surge in people wanting to sell their European property. Many are converting their euros into sterling, while others are buying in the US as the euro is at a record high against the dollar — you can get $1.58 to the euro today compared with $1.36 a year ago.” Assetz Finance, a property company, said there had been a 40% increase in the number of inquiries about equity release mortgages on overseas property, where you release capital from your foreign property and bring it back to Britain. This works because rates are lower in Europe than in the UK, typically 5.5% compared with 4.5%, and the exchange rate is favourable.

Katy Hepworth from Assetz said: “With a better range of equity release products available in Europe, property owners can now make the most of the equity in their holiday home. Not only can they get a cheaper euro mortgage deal, the euros they release are worth more when converted into sterling.”

If you owned a property worth €300,000 in France, you could release 70% of its value at a rate of 4.4% through Assetz International. This would give you €210,000 or £166,000 at current exchange rates. You could use this to pay off some of the debt on your UK property and so secure a better deal.

Last week, Trisha Mason, 63, a property investor, released €1m equity from her property in Avignon in southern France at a rate of 4.75% for 12 months. “I plan to invest the money in property outside of the eurozone.

I’m thinking of either converting it to sterling or investing in property in the US.”

At the same time, lenders are making it more difficult for new buyers to get in, raising fears the European market will stagnate.

As well as tightening its criteria, Banco Halifax has completely withdrawn mortgages for self-build or “construction mortgages” used to purchase a new property which is still being built. Interest-only deals have also been reduced from 15 years to five years.

Miranda John at Savills Private Finance, a broker, said: “The credit crunch has spread from the US to the UK but it now looks as though it will have repercussions in other parts of Europe. Though Halifax has traditionally offered better deals in Spain, it has been forced to bring itself into line with local Spanish lenders.”

Barclays has also raised the rates on euro mortgages in France. From this month, its one-year fixed-rate went from 4.6% to 4.8%.

Local banks in Spain have also started to restrict lending. In Spain, Banco Santander has increased the minimum deposit required by nonresidents from 20% to 30%. Simon Cotton of Spanish estate agent Bonnin Sanso said: “Lenders are getting much tougher, asking for things like credit reports. The value of property is also decreasing in many areas.”

However, analysts said Europe is still less at risk from a property crash than Britain.

Jennifer McKeown from Capital Economics, a consultancy, said: “Given that households in the eurozone have not overstretched themselves like those in the US, and indeed here in the UK, the impact on consumer spending growth should not be disastrous.”