In seasonally adjusted terms, the Bank’s measure of housing equity withdrawal in 2011 Q3 was -£8.6bn compared to -£9.6bn in 2011 Q2, revised from the previous Q2 estimate of -£9.1bn. HEW as a percentage of post-tax income was -3.3% in 2011 Q3, compared to the revised percentage for 2011 Q2 of -3.7%.
The negative figures indicate a continued injection of housing equity by households overall, with the net flow of lending secured on dwellings remaining weaker than their investment in housing. The flow of secured lending remained positive.
The decline in HEW – and move to injections of housing equity - since the start of the financial crisis has not been associated with an increase in repayments of secured debt. Gross secured loan repayments have fallen since that time, which has reflected both lower housing market activity and a reduction in remortgaging.
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.
Mark Harris, chief executive of SPF Private Clients comments:
"Predictably, the third quarter figure was negative. After all, the collapse in house prices in many parts of the UK has squeezed the level of equity in the UK's housing stock.
"Many people have no option to draw on their equity as there simply isn't any equity there. And even where there is equity, you're not guaranteed to get your hands on it given the caution of lenders.
"The paying down of debt in recent years has been passive rather than active. People have no choice but to pay down their mortgages.
"High inflation means many households aren't able to pay down their mortgage debt as aggressively as they would like to.
"Moving forward, the process of equity withdrawal could be set for significant change.
"The FSA's Mortgage Market Review includes proposals that anyone adding to their mortgage to consolidate other debt will have to get advice to ensure they fully understand the implications and costs.
"If these proposals are implemented, the banks will have to re-gear their entire operations to put the correct advice procedures in place.
"Invariably this will result in higher borrowing costs."
