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Home equity withdrawal hits new low

Wednesday, 30 November 2011 1:36 PM

The sharp reverse in home equity withdrawal continued in the second quarter of the year thanks to lower housing market activity and a reduction in remortgaging.

The Bank of England said equity withdrawal totalled -£9.1 billion in the second quarter of 2011, compared to -£8.9bn in the first quarter. A negative figure indicates an injection of equity by households overall.

During the boom home owners were withdrawing equity of up to £8 billion a quarter by remortgaging but that has changed since the start of 2008.

The equity injection amounted to an average of 3.5 per cent of owners' post-tax income, unchanged on the first quarter.

According to the Bank, gross secured loan repayments have fallen since the start of the financial crisis, which has reflected both lower housing market activity and a reduction in remortgaging.

However, it says the fall in housing equity withdrawal since the financial crisis is likely to reflect a fall in the number of housing transactions, with little sign that households in aggregate are making an active effort to pay down debt more quickly than in the past.

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