In an article in the latest issue of the CML's economics journal Housing Finance, the CML analyses data from the Survey of English Housing to show that of all equity withdrawn between 1998 and 2003, just under two-thirds was attributable to last-time sales and trading
Nearly a quarter was attributable to remortgaging and further advances, with the remainder (13%) attributable to people moving house and borrowing more than they needed to finance the move.
Remortgagers accounted for the greatest numbers of people withdrawing equity. And 69% of those remortgaging between 1998 and 2003 withdrew equity, compared to only 29% of movers.
But remortgagers tended to withdraw much lower sums than those withdrawing equity through other methods, with an average amount of £21,000 compared with an average £72,700 for last-time sales.
Among remortgagers who withdrew equity, the bulk (62%) intended to use at least some of the money to finance home improvements (and so effectively plough it back into housing investment).
The article also points out that, despite recent high levels of equity withdrawal, households' general equity position remains strong. The average median equity level is £56,000 per household, 36% of the average house value of £155,000.
The CML authors, analyst Jackie Smith and economist Jennet, says:”As interest rates have begun to rise, we are expecting borrowers to continue to switch onto the most favourable rate available. However, while we expect the occurrence of serial remortgaging to increase over time, it is likely that equity withdrawal will slow. This will be in response to slowing house price growth and rising interest rates. The CML's latest forecast suggests house price growth will slow significantly over the next two years and following that there will be a period of very modest growth.”