Homeowners getting wiser – stop availing equity release

Posted under General by Jermaine

The Bank of England’s figures indicate that UK homeowners have stopped making use of cash against their homes.

The equity release scheme was designed to release cash to the homeowners from the value of their property. According to the reports from Central Bank, the scheme was at its peak with the maximum withdrawals in 2003, thereafter number of withdrawals started going down steadily.

The housing withdrawal figures of the Bank of England have slid to a negative for the first time in 10 years, indicating homeowners were more concerned with reducing their debts rather than withdrawing cash from value of their property.

The second quarter of the year witnessed an interesting trend. Borrowers have increased their equity on homes by £2.8 billion rather than withdrawing cash. Injection of £2.8 billion cash in the Bank was the biggest of its kind since 1970 when it started compiling data.

Howard Archer at Global Insight, who had been a close observer of the developments of the sector, explained that attraction towards housing equity release scheme had been waning due to slump in housing prices, increase in mortgage rates and tightening of lending criteria.

Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors added that equity withdrawals have gone to negative side for the first time since 1990. He concluded that downturn in the property market was cutting down equity built up over recent years.