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Last Updated: Tuesday, 4 October 2005, 10:43 GMT 11:43 UK
Mortgage equity withdrawal rises
Mortgage equity
The amount of money people are borrowing against the value of their homes has rebounded, figures show.

Mortgage equity withdrawal rose to 8.7bn between April and June from 6.44bn in the three months to the end of March, the Bank of England said.

It was the first quarterly rise since autumn 2003, when mortgage equity release peaked at 17.5bn.

The figure has fallen since then, a factor which experts say helped trigger the recent consumer spending slowdown.

The latest upturn in this form of borrowing may be linked to the increase in the number of property sales in the UK this year.

Tony Dolphin, chief economist at Henderson Investors said: "Perhaps this is another sign that the housing market has stabilised."

Borrowing boom

Home owners have borrowed 198bn using mortgage equity withdrawal since the start of 2000, encouraged by rising house prices and low interest rates.

The conditions made it very cheap for people to top up their mortgages and spend the proceeds, especially as house prices were rising fast.

Mortgage equity release peaked at the end of 2003 as the Bank of England started to raise interest rates again in an effort to cool down the housing market, a move which led to a slowdown in property prices and a big fall-off in borrowing against property values.

The decline in borrowing against property has been a leading factor behind a slowdown in consumer spending over the last year.

This can be seen most clearly in the car industry where sales are currently running 6% lower than in 2004.

Meanwhile, a host of retailers such as Marks & Spencer, MFI and French Connection have warned of falling sales and profits while other names - including Allders and Courts - have collapsed.

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