Rise in UK mortgage equity renewal

Mortgage equity withdrawal (MEW) rose during the second quarter of this year for the first time since the third quarter last year, according to new data.

The Bank of England (BoE) reports that MEW ? the equity Britons have extracted from their homes without re-investing it in property ? rose sharply to £8.7 billion for the second quarter, up considerably from the figure of just over £6.4 billion for the first quarter.

However, the BoE says that this is still well down on the figure of £14.5 billion recorded a year ago, at a time when housing prices were rising at an annual rate of 20 per cent.

"MEW appears to have found its way into increased holdings of financial assets (equities, bonds) as much as extra spending," commented Geoffrey Dicks, UK economist at RBS Financial Markets.

"Generally the pick-up in MEW is probably indicative of more 'normalisation' of the housing market but while it is saved rather than spent, the policy implications are not huge."

High house prices over recent years have encouraged mortgage-holders to refinance their policies so as to extract cash.

MEW could continue rising in the near future, given that the BoE has cut interest rates to 4.5 per cent, and that the housing market now seems to be showing signs of stabilising after a year of uncertainty.

For more information on mortgage brokers click here