Is Housing Equity Withdrawal a Thing of the Past?
January 2, 2009
With house prices continuing to fall and recession upon us, our habit for cashing in on the value of our properties in order to fund spending has stopped. Quite simply, housing equity withdrawal is when we take out bigger mortgages extracting the money from the value of our properties in order to fund major purchases. Instead, we are paying down our debts rather than adding to them.
According to recent Bank of England statistics for the period between July and September 2008, a second successive negative reading was shown in respect of housing equity withdrawal. During this period a staggering £5.7bn of equity was put back into homes compared to £2bn put back in the second three months of the year.
The turnaround is simply breathtaking when you consider that in the first three months of 2008, £5.6bn of housing equity was withdrawn and an eye watering £11.1bn withdrawn in July to September in 2007. This tends to prove that we are concentrating on repaying our mortgages rather than adding to them. In the good times when house prices were on the up, raising extra cash in this way was fairly risk free (providing property prices continued to rise and you were in a position to continue with your mortgage repayments). Now that the economy is showing cracks wider than the San Andreas Fault, our attitude to equity release is changing albeit for the short term.
Have we learned our lessons or will our passion for equity withdrawal return as soon as the good times roll into town once again? Only time will tell.
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