Britons focus on repaying mortgage
Updated on 29 December 2008
The amount of equity Britons withdrew from their homes was negative for the second quarter running during the three months to the end of September, figures show.
The Bank of England said equity withdrawal fell to minus £5.7 billion during the third quarter of the year, meaning that instead of extending their mortgage debt during the period, people focused on repaying their home loan.
The figure is the largest net injection of equity since the records began in 1970, and only the second time that housing equity withdrawal has been negative since 1998.
Homeowners' decision not to unlock money tied up in their homes to fund large purchases during the third quarter of the year is in stark contrast to the same period of 2007, when people borrowed £11.14 billion through further advances on their property.
It is also down on the £5.65 billion that people unlocked during the first quarter of 2008, itself the lowest figure for nearly seven years.
Equity withdrawal turned negative during the three months to June, although the Bank revised down the amount of mortgage debt that was repaid to £1.95 billion, compared with £2.76 billion when the figure was first announced.
Equity withdrawal enables homeowners to cash in on rising house prices by increasing their mortgages to convert some of the increase in the value of their home into cash.
The money is typically used to fund big purchases such as cars or home improvements, or for debt consolidation.
But while people feel confident about increasing the size of their mortgage debt during a period when house prices are booming, they are far less inclined to do so when they are falling.
The amount of equity people are withdrawing has also been hit by the credit crunch, with the tighter lending criteria being used by lenders making it more difficult and expensive for people to extend their mortgage.
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