Homeowners stop using properties to gain loans

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Bank of England figures reveal extraordinary collapse in mortgage equity withdrawal

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Re: Homeowners stop using properties to gain loans

Homeowners stop using properties to gain loans

• Patrick Collinson
• The Guardian,
• Saturday October 4 2008
• Article history

Homeowners have stopped using their properties as a cash machine to splash out on kitchens or pay off credit card debts, according to Bank of England figures yesterday which revealed an extraordinary collapse in mortgage equity withdrawal.
During 2006 and 2007, households borrowed about £4bn a month against their homes to build extensions, buy cars or enjoy holidays. But in the three months to June , the figures turned negative, with households reducing their mortgage debts by £2.8bn rather than extending them.
The reversal will be a major blow to spending on Britain's high streets and car showrooms. Equity withdrawal was equal to more than 6% of national income in the first half of last year but is now below zero.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors said: "Against an increasingly gloomy economic backdrop there is a strong case for the Bank of England to ... cut interest rates at next week's meeting."
Mortgage lenders have also become more cautious about remortgages.
Ray Boulger of Charcol said: "Lenders are now asking more questions. They want to know what the money is for."
Last night Halifax raised rates on its mortgages. It repriced its fixed rates by 0.1% and put up rates on tracker mortgages by 0.2%. RBS also raised rates by up to 0.75%.