Home repayments are first priority

Homeowners within the UK are no longer cashing in on the value of their properties to fund spending, latest figures show.Quarterly figures released from the Bank of England on housing equity withdrawal showed a second successive negative reading during July and September.

Housing equity withdrawal is the process when homeowners take out larger mortgages, extracting additional money to spend on major purchases such as caravans or cars.

But households put £5.7bn of equity back into homes during the third quarter in 2008.

This came after they put £2.5bn back into their homes in the second three months of the year as property prices started to fall sharply.

This is in stark contrast to £5.8bn housing equity withdrawn in the first three months of the year and £11.3bn withdrawn in June to September last year.

The latest information shows that people are concentrating on repaying their mortgage, rather than adding further debts to consider.

Billions of pounds were extracted during the housing market boom as people saw the value of their property shoot up.

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It was highest in the last three months of 2003 at £17.4bn, and was consistently above £11.7bn in each quarter of 2006.

This funded customer spending, as it is defined in the figures as money that is not invested back into property or home improvements.

In April to July last year, the figure turned negative for the first time since the second quarter of 1998.

The latest statistic shows this trend has continued as it is the biggest injection of equity since the figures were first compiled in 1970.

“Not so long ago, an Englishman’s house wasn’t just his castle, it was his cash machine, too. This, very clearly, is no longer the case,” said Andrew Montlake, partner at independent mortgage brokerage Cobalt Capital.