Mortgage equity withdrawal mini-revival fails

Mortgage equity withdrawal mini-revival fails

Wednesday, January 04, 2006

Families are borrowing less money against the value of their homes - despite the recent revitalisation in the property market.

After a short revival last year the borrowing has now reverted to its downward trend. The Bank of England said yesterday that in the third quarter of last year, mortgage equity withdrawal (MEW) was just £8.3 billion, down from £10 billion in the second quarter.

This was despite the Bank of England's August cut in interest rates, boosting both house prices and levels of activity in the housing market.

Equity withdrawal enables homeowners to increase their mortgages in return for a cash lump sum if their property is worth more than the original sum they borrowed. Currently it adds just 4% to the spending power of UK households, but in the peak of MEW, in the final three months of 2003, it added 9%.

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