Surprise' as equity withdrawal slows

The rate at which Britons are withdrawing equity from their homes has slowed, figures showed today.

The Bank of England has reported that, during the second quarter of 2003, people withdrew equity to the value of ?11.29bn from their properties.

The sum was well up on the ?8.28bn taken out over the same period in 2002, but down on the previous quarter's revised figure of ?11.48bn and the record figure of ?12.11bn reached in the final quarter of 2002.

Simon Rubinsohn, chief economist at fund manager Gerrard, said he was "a little surprised" that the rate of equity withdrawal had slowed, but added that the figures were still strong. "I thought the numbers would be a little higher," he said. "It's odd that the last quarter of last year is the high point. I anticipated the first half of this year being stronger."

He added that the slowdown may have been caused by mortgage rates rising slightly, making people less keen to refinance their home loan.

Britons are increasingly cashing in on the current housing boom by withdrawing money from their homes to finance large purchases or consolidate debt. Under equity release schemes, lenders allow homeowners to increase their mortgages in exchange for a cash lump sum if their property is worth more than the original sum they borrowed.

Historically low interest rates and double digit house price inflation have led to a steep increase in equity withdrawal in the last couple of years.

During the three months to the end of June money withdrawn from properties represented 6% of people's post-tax income, well down on a peak of 7.7% reached in 1988.