LONDON - The latest figures from the Bank of England show that the amount of money being borrowed by people against their houses in order to inflate their incomes has dropped once again. The Bank said that mortgage equity withdrawal figures for the third quarter of 2005 stood at £8.3 billion as compared to the £10 billion recorded in the second quarter.
These figures demonstrate that the tendency to borrow against homes has returned to the previous year’s figures, which were in the lower half due to the rise in interest rates. The Bank reported that homeowners in the country had borrowed close to £207 billion against their homes since 2000.
But there has been a sharp decline in borrowing in the last two years mainly due to the interest rates, which remain on the high side as well as a dip in consumer confidence following decline in house price inflation.
The mortgage equity withdrawal was at a high of £17.6 billion in the first quarter of 2003 after which there has been a steady decline. Because of the boost provided by this figure, there was a rise in take-home incomes to the tune of 9 percent in 2003. At the moment MEW accounts for just 4 percent of the total spending power of households in the country.
"Equity withdrawal has roughly halved from its peak - it's reasonable to conclude that has been one factor behind the slowing in consumer spending in 2005," commented Tony Dolphin, chief economist at Henderson Investors, a City firm. He added that this has been a huge factor in the drop in retail sales last year.
Howard Archer, chief UK economist at Global Insight said that the Bank figures suggested that the increase in the second quarter was not the beginning of a revival in this sector, "The markedly reduced mortgage equity withdrawal since its fourth-quarter 2003 peak has undoubtedly weighed down significantly on consumer spending since mid-2004," he opined.
Posted
on : Tue, 03 Jan 2006 18:30 GMT | Mortgages News
By : Mark Richardson
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