Homeowners not cashing in on their equity
November 12, 2008
According to recent figures released from the Bank of England the number of homeowners in the UK that are now cashing in on their equity by borrowing against it has dropped. It is thought that the number of people borrowing against their equity dropped between April and June of this year, according to a recent report.
Officials state that over recent years homeowners have cashed in billions of pounds against the equity in their homes as a result of the property values soaring over the past decade, leaving homeowners with a tidy nest egg in terms of their equity. However, over the past year house prices have been falling month on month, and this, coupled with the global credit crunch and tight lending conditions, has led to people becoming far more nervous about borrowing against their property.
One leading economist stated: “Higher mortgage rates, markedly tighter credit conditions and falling house prices have increasingly reduced the attractiveness of, and scope for, housing equity withdrawal. This reinforces our belief that we are in for an extended period of serious consumer retrenchment.”
An official from the Royal Institute of Chartered Surveyors stated: “Equity withdrawal turning negative for the first time since the late 1990s sends a clear message that the downturn in the housing market is reducing access to equity built up in property over recent years.”
The data was released by the Bank of England in August, after officials revealed that mortgage lending in that month had collapsed. Lending levels in August stood at just £143 million, which was just 2% of the level in August of the previous year.
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