LONDON - The latest figures from the Bank of England show that the second quarter of the year was a good one for the mortgage equity withdrawal rates.
This figure hit a high of £8.7 billion in the three months between April to June as against the £6.44 billion posted in the previous quarter from January to March, the Bank of England stated. Mortgage equity withdrawal is a measure of the amount that has been taken out by a house owner on his/her property, but has not been reinvested into the same. A rising MEW signifies that the consumer is reasonably confident about the market forces.
Geoffrey Dicks, UK economist at RBS Financial Markets said as much, "MEW appears to have found it's way into increased holdings of financial assets (like equities, bonds) as much as extra spending. Generally the pick-up in MEW is probably indicative of more `normalization' of the housing market but while it is saved rather than spent, the policy implications are not huge."
MEW had peaked at £17.5 billion in the autumn of 2003. Since then the trend has been that of caution first. Weakening consumer confidence has seen the MEW plummet. Only recently has it begun to show signs of revival. Sharply rising house prices have always triggered a concurrent rise in MEW, but this year house prices have been sliding to new lows.
In fact, last week's figures show that house prices fell for the 15th month running. However, the market is showing definite signs of revival as evidenced by the increase in MEW. It is also generally accepted that the August rate cut by the Bank of England will propel the MEW further north.
Posted
on : Tue, 04 Oct 2005 20:20 GMT | Mortgages News
By : Paula Jenkins
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