Owners not taking equity from homes
Updated on 03 October 2008
Britons are no longer withdrawing equity from their homes to fund large purchases but are instead focusing on repaying their mortgages, figures have shown.
The amount of money unlocked from property during the second quarter of the year turned negative for the first time since 1998 to stand at minus £2.76 billion, according to the Bank of England.
The negative figure means that rather than extending their mortgage debt during the period, people increased their housing equity.
The figure, which was the largest net injection of equity since the records began in 1970, is in stark contrast to the £5.24 billion that people unlocked from their homes during the first quarter - and that was the lowest figure for nearly seven years.
Equity withdrawal enables homeowners to cash in on rising house prices by increasing their mortgages to convert some of the gains 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 situation has been made worse by lenders tightening their lending criteria in the face of the credit crunch, making it more difficult and expensive for people to remortgage, particularly if they want to borrow a high proportion of their home's value.
Consumers will also be feeling less confident in the face of the deteriorating economy and rising unemployment.
The figures for equity withdrawal have been steadily falling since the third quarter of last year, around the time that property price falls were picked up by house price indexes.
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