This is still a substantial figure — up a staggering 36% (£3bn) from the same time last year — and the marginal drop is likely to be mainly a reflection of the decrease in house price inflation from the same time last year. It is not a reversal of the underlying trend.
David Bitner, head of product operations for The MarketPlace, Bradford & Bingley, says: "Many people use mortgage equity withdrawal as a legitimate part of their wider financial planning. Older borrowers, for instance, who find themselves cash poor and asset rich can use MEW as a way of redressing the balance. However, there is a concern that some borrowers may be less prudent and view their property equity gains as extra spending money.
"In the UK there is a strong 'buy now, pay later' culture which has been fostered by the low interest rate environment. What's needed, therefore, is a fundamental shift in the psychology of borrowers before spending attitudes begin to change. At the moment, with historically low interest rates, many people think their debt levels are manageable. However, if rates start to rise - as many observers think they will do as the economy continues to improve - people could find themselves in real difficulty. This situation could also be further exacerbated when you consider the record levels of unsecured borrowing people are taking on. Mortgage equity withdrawal could be a real issue in the future if people struggle to pay off their expensive loans and credit cards.
"Homes, though, are not piggy banks to raid so borrowers really need to think very carefully before taking out the value of their property."
Of course, it's important to distinguish between equity withdrawal to fund spending and remortgaging onto a better deal to save money. In terms of the state of people's long term finances, we need to see less of the former and more of the latter.
