The latest figures from the Bank of England have shown that people are refraining to use the value of their homes to make purchases.
Homeowners are shying away from taking equity out of their property as further gloom in the market is predicted.
Last week, the Royal Institute of Chartered Surveyors (Rics) predicted that 2009 will see a further drop of ten percent in housing prices, marking a fall of 25 percent from summer 2007’s peak. This lack of confidence in the property market has come as the economy has been hit from a number of sides, including by the credit crunch.
Now, with other commentators predicting that the economy will get worse before it gets better, Bank of England figures have shown that people are playing it safe with their property. Instead of taking out a larger mortgage, providing them with money to buy expensive items such as cars, homeowners are putting equity back into their property.
For the second successive quarter (July to September), the Bank’s housing equity withdrawal statistics were in the negative. Some £5.7 billion was put back in during the third quarter of 2008, following £2 billion in the second quarter. By way of contrast, the first three months of the year saw £5.6 billion withdrawn while £11.1 billion was taken out in the third quarter last year.
"Not so long ago, an Englishman's house wasn't just his castle, it was his cash machine, too. This, very clearly, is no longer the case," Andrew Montlake, partner at independent mortgage broker Cobalt Capital, told the BBC.
"People are scared stiff of recession and rising unemployment and are now paying down their debts rather than adding to them."
