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Home equity withdrawal falls
The amount of money borrowed by people remortgaging and cashing in on the increased value of their homes has fallen, according to figures from the Bank of England. Equity withdrawal - the amount of mortgage borrowing not used to buy or improve houses - fell from £7.4 billion in Q4 2007 to £5.0 billion in Q1 2008. This took it to the equivalent of 2.3% of disposable income, down from 6.5% at the start of 2007.
Capital Economics' UK Economist Vicky Redwood believes that a combination of the credit crunch and further falls in house prices will prompt equity withdrawal to fall to zero by next year.
Ms Redwood says, "The sharp rise in mortgage rates over the past few months has made withdrawing equity more expensive. And the need to keep loan to value ratios as low as possible in order to get the best mortgage deals will no doubt have discouraged some households from withdrawing equity."
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