Equity withdrawal not used for house purchase

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Latest news in the UK for December 2006 covering the financial news sector.

The Council of Mortgage Lenders (CML) has reported 85 per cent of people who withdrew equity in the last three years used the money to fund home improvements or pay off debt.

The Survey of English Housing, a continuous survey commissioned by the Department for Communities and Local Government (DCLG), revealed 56 per cent of people used equity release to fund renovation or improvements on their homes and a 29 per cent chose to pay off debt.

Nearly 5 per cent of English home owners, equivalent to 656,000 households, withdrew equity in each of the last three years

Bernard Clarke, communications manager at the CML, commented: “Despite anecdotal evidence that there has been significant equity withdrawal to fund property purchases, only 2 per cent of households drew on equity to buy another property abroad, with a further 2 per cent using their housing wealth to help buy a home for another family member, including a child or grandchild.”

“Figures for equity withdrawal in the last three years – and for a number of years before – may have been high given market conditions. The combination of rapidly rising prices and low rates helped ensure that home owners build equity quickly and could draw against it cheaply.”

James Cotton, mortgage specialist for London & Country, said: “It’s comforting that a lot of the money withdrawn from housing is put back in, as it’s increasing the value of the housing stock. Equity release can be a useful tool, just as long as it doesn’t become a habit and it’s being used sensibly.”