House equity withdrawal rate slows

The rate at which Britons are withdrawing equity from their homes has slowed, figures showed today. The Bank of England said that people took £15.76bn out of their properties during the three months leading to the end of March.

This was lower than the revised figure for the fourth quarter of last year, which was a record £17.45bn. The amount of money people released from their homes during the first quarter of the year represented 8% of their post-tax income, down from 8.9% during the previous three months.

The figures show that Britons are increasingly cashing in on the housing boom by withdrawing money from their homes to finance large purchases or consolidate debt. Under equity release schemes, lenders allow homeowners to increase their mortgages in exchange for a cash lump sum if their property is worth more than the original sum they borrowed.

Historically low interest rates and double digit house price inflation have therefore led to a steep increase in equity withdrawal in the last couple of years. Economist John Butler of HSBC said that although the amount of equity withdrawn was lower than last year, the figure was still high.

He said that this is likely to increase the chance of interest rate rises in the coming months as it will "fuel concerns about the sustainability of the consumer". But Mr Butler added that the rapid rise in debt raised the question of whether rates would come back down again in 2005.