Homeowners 'stop taking equity'

UK homeowners have stopped cashing in on the value of their homes, according to figures from the Bank of England.

Housing equity withdrawal - when owners take out bigger mortgages to spend on things other than their home - dried up in the April-to-June quarter.

Households put £2.8bn of equity into their homes, the first negative withdrawal reading since 1998.

People took £5.2bn from their homes in the first quarter of 2008, and about £10bn in the April-June period in 2007.

Billions of pounds have been extracted in recent years as the value of people's homes shot up. But this has slowed as house prices have fallen.

'Consumer retrenchment'

"Higher mortgage rates, markedly tighter credit conditions and falling house prices have increasingly reduced the attractiveness of, and scope for, housing equity withdrawal," said Howard Archer at Global Insight.

"This reinforces our belief that we are in for an extended period of serious consumer retrenchment."

The data comes after new mortgage lending collapsed in August, according to figures from the Bank of England released at the end of September.

Banks and building societies lent an extra £143m in home loans in August, just 5% of July's lending figure and only 2% of the lending in August 2007.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "Equity withdrawal turning negative for the first time since the late 1990s sends a clear message that the downturn in the housing market is reducing access to equity built up in property over recent years."

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