According to the BoE, mortgage equity withdrawal figures, home owners withdrew £14.6 billion from their homes in the period between October and December 2006. This follows a jump in withdrawals to £12.2 billion in the period between July-September 2006.
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This formed 6.70 per cent of post-tax income, up from 5.50 per cent in Q3 and a low of 3 per cent in early 2005. However, it remains below the peak of 8.90 per cent seen in 2003. For last year as a whole, mortgage equity withdrawal totalled £49.7 billion, up significantly from £36.6 billion in 2005.
This follows on from a rise in house prices of nearly 10 per cent in 2006, while mortgage lending rose in February and approvals remained steady despite forecasts of a fall.
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Howard Archer, economist at Global Insight, said: “The significant increase in mortgage equity withdrawal in 2006 was fuelled by the pick-up in house price inflation over the year.
“It was also encouraged by the very limited growth in households’ real disposable income in 2006, as well as consumers’ increased desire to fund their spending by cheaper measures than using credit cards.”
Peter Fisher, director at NHFA, said: “The population is heavily in debt due to equity withdrawal being used to fund lifestyles. As this happens, the price of houses goes up and soon we may be in the position we were in 15 years ago, when borrowers had to return keys to lenders. The amount being spent is scary.”
