6
Apr
Home owners' equity is still increasing
UK homeowners increased the value of their stake in their
properties by £22.3bn last year, Bank of England figures
show.
They reflect continued decisions by homeowners to pay off more
of their mortgages, and lenders' insistence that borrowers put down
large deposits.
The trend towards equity injections started in the second
quarter of 2009.
In the preceding 10 years, homeowners had borrowed £327bn
against the inflated value of their homes.
"The seventh successive, and still marked, net injection of
housing equity in the fourth quarter of 2009 is the consequence of
the ongoing desire of many people to improve their personal balance
sheets, given high debt levels and still serious concerns and
uncertainties over the economic situation," said Howard Archer of
IHS Global Insight.
Easy credit
The long house price boom, which started in the late 1990s,
turned people's homes into the equivalent of a cheap credit
card.
Hundreds of thousands of home owners borrowed cash in the form
of top-up mortgages. They used it to pay off money they owed on
credit cards, to finance big-ticket spending on items including
holidays and cars, or simply to invest.
At its peak in 2003, the process was adding nearly 9% a year to
the post-tax income of the entire UK population.
But under the impact of the credit crunch and the property
slump, homeowners reversed that trend and they have now raised the
equity in their properties by £36bn in 21 months.
The value of the extra equity being added each quarter slowed
down during 2009, as house prices started rising again gently.
In the first quarter of 2009, home owners' equity increased by
more than £7bn, but by the fourth quarter, this had risen by
only another £4bn.
Cheaper mortgages
The availability of mortgages continued to ease in the past
month, according to figures from the financial information service
Moneyfacts.
"Even though there is a slight reduction in availability of
mortgages, it is encouraging that the average rates are still on
the decline," said Darren Cook of Moneyfacts.
Figures from Moneyfacts show that:
• The interest rate on the average two-year fixed-rate
mortgage fell from 4.74% in March to 4.72% in April
• The average five-year fixed-rate deal dropped from 5.92%
in March to 5.87% in April
• The average two-year tracker-rate went down from 3.65%
in March to 3.58% in April.
The percentage of deals requiring at least a 25% down payment
also dropped again, from 57% a month ago to 56% at the beginning of
April.
However the total number of mortgages on the market shrank
slightly - from 1,798 at the start of March to 1,727 on 6
April.
"This is due largely to Accord Mortgages withdrawing a large
portion of its mortgage range," said Darren Cook of Moneyfacts.
"Accord Mortgages have advised that the withdrawals are
[because] they are unable to deal with the excessive demand for its
mortgages," he added.
source: www.bbc.co.uk/news Tuesday 6th
April 2010