Remortgagers shun equity withdrawal
Latest figures from the Bank of England show the extent to which Britons have said goodbye to the era in which homes provided cash for comfortable lifestyles.
During the housing market boom, many homeowners withdrew equity when remortgaging but falling property prices have led to a re-evaluation and Britons are now keen to repay their mortgages and increase the amount of equity held in their homes.
For many, equity withdrawal is no longer an option because tighter lending criteria means they cannot borrow on high loan-to-value ratios.
Between July and September of this year, mortgage borrowers paid back £5.7 billion more than they borrowed, continuing a trend established in the second quarter of the year, when equity withdrawal stood at -£2 billion.
By comparison, £11.1 billion was withdrawn in July to September of 2007 and £5.6 billion in the first three months of 2008.
Equity release has been funding consumer spending in the UK for years.
It peaked in the last three months 2003 when £17.1 billion was released from property.
This means of raising cash was frequently connected to so called “champagne moments”, such as the purchase of new cars and expensive holidays.
However, recent research from Durham University shows that the money was more likely to be needed to support children, deal with a fall in income, or meet the costs of relationship breakdown.