Mortgage equity withdrawal rises to 8.7 billion pounds in Q2 |
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Wed, 05 Oct 2005 09:05
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LONDON: Mortgage equity withdrawal (MEW) has surged to 8.7 billion pounds in Britain in the second quarter of current fiscal, highest since the third quarter in 2004, according to data available with the Bank of England.
The rising property prices have given an impetus to the people to refinance their mortgages to derive cash, which can be spent elsewhere. MEW is a measure of equity Britons have extracted from their homes but which is not re-invested in property.
The Bank of England disclosed that MEW grew from 6.437 billion pounds in the first quarter to the current level, but is well below the peak 14.5 billion pounds a year ago. Analysts believe the August cut in interest rates could support MEW even as the property market is stabilising after a year of stagnation.
MEW rose to 4.2 per cent from 3.2 per cent as percentage of post-tax income. Official data last month showed the saving ratio rose to 5 per cent in the second quarter from 4.5 per cent in Q1.
MEW had peaked at the end of 2003 but started slowing as the Bank of England raised interest rates in an effort to cool down the housing market. This is one reason cited by experts for the slowdown in consumer spending last year.
The Bank of England data also shows that homeowners have borrowed 198 billion pounds using MEW since the start of 2000, encouraged by rising house prices and low interest rates.
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