Drop-off in home equity release loans
UK homeowners are withdrawing less cash from their homes as higher borrowing costs take their toll, new research indicates.
09:28 06 October 2004
UK homeowners are withdrawing less cash from their properties as higher borrowing costs take their toll, new research indicates.
Figures from the Bank of England show that mortgage equity withdrawal fell to 15.0 billion in the second quarter from 15.4 billion in the first quarter.
The second quarter figure corresponds to 7.5 per cent of post-tax income, down from 7.8 per cent in the previous quarter.
The second quarter's figure was way down on the all-time high of 17.2 billion recorded in the fourth quarter of 2003, when it stood at 8.8 per cent of post-tax income.
Third-quarter figures are expected to show a further decline as a raft of data suggests the UK housing market has slowed down dramatically.
When homeowners remortgage their properties, they often look to borrow more money against the value of their homes.
Some of this is used to pay off unsecured debt or to invest in other financial assets but much is used to finance consumption, such as the installation of new kitchens or windows.
One of the reasons the Bank's interest rate setting Monetary Policy Committee has used to justify higher interest rates has been concern that a surge in borrowing, particularly on credit cards, has been used to finance consumption.