Borrowing on equity up in UK in 2006

More homeowners in the UK are borrowing on the equity in their homes, according to new data from the Bank of England. Analysts say that this is largely due to lack of growth in disposable income last year and to the desire of consumers to borrow money at a lower interest rate than credit cards charge.

Mortgage equity withdrawal number released by the Bank show that homeowners borrowed £14.6 billion on their equity in the fourth quarter of 2006, after having borrowed £12.2 billion from equity in the third quarter. For the whole year, mortgage equity withdrawal totaled £49.7 billion, significantly higher than the £36.6 billion borrowed on equity in 2005.

According to analysts, the money borrowed was used for consumer spending, as well as to repay credit card debt and personal loans, to make investments and to pay into pensions schemes. They also said that the borrowing could become a problem if house prices were to fall significantly, but that isn’t expected to happen, at least in the near future. A supply shortage is expected to support prices for houses as long as demand remains high.