Fewer homeowners withdrawing equity

7 October 2008

The uncertainty surrounding the housing and mortgage markets has meant that fewer homeowners are relying on equity tied up in the value of their homes as a source of funds, recent figures have shown.

The figures from the Bank of England showed that households had collectively paid £2.8bn into their homes in the April-to-June quarter, the first ‘negative withdrawal’ reading since 1998.

In comparison, people took £5.2bn from their homes in the first quarter of 2008, and about £10bn between April and June 2007, according to the BBC.

The rapid rise in house prices in the decade leading up to 2007 had made it easy for homeowners to withdraw from their increased equity. But the recent falls have meant that this is no longer a viable option for many mortgage holders.

Speaking to the BBC, Howard Archer at Global Insight said: “Higher mortgage rates, markedly tighter credit conditions and falling house prices have increasingly reduced the attractiveness of, and scope for, housing equity withdrawal.

“This reinforces our belief that we are in for an extended period of serious consumer retrenchment.”

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