Britons stop using houses as banks

| October 3, 2008
Britons stop using houses as banks

Homeowning Britons have stopped using their properties as banks, according to figures from the Bank of England.

For the first time since 1998, consumers have become more focused on paying off their mortgages rather than remortgaging to fund their lifestyles, or consolidate debts.

In the three months to the end of June, the UK’s mortgage borrowers increased the amount of equity held in their homes by £2.8 billion, the highest quarterly figure since the Bank began keeping records, in 1970.

By comparison, in the same period of 2007, around £10 billion was borrowed by people against their houses in order to inflate their incomes.

With mortgage costs rising and property prices falling, adding a few thousand to a mortgage and extending its term is no longer an attractive or cost effective way of raising cash.

Tighter lending criteria and concerns about job security will also have played their part in the turnaround.

Equity withdrawal levels peaked way back in the final quarter of 2003, when house prices were rising and mortgage interest rates below 4% were freely available.

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