BOE publishes Housing Equity Withdrawal figures

In seasonally adjusted terms, the Bank’s measure of housing equity withdrawal in 2011 Q1 was -£5.8bn compared to -£7.1bn in 2010 Q4 (Table A), revised from the previous Q4 estimate of -£7.0bn. HEW as a percentage of post-tax income was -2.3% in 2011 Q1, compared to a revised -2.8% in 2010 Q4.

The negative figures indicate a continued injection of housing equity by households overall, with their investment in housing remaining stronger than the net flow of lending secured on dwellings. The net flow of secured lending remained positive, with gross lending and repayments little changed.

An article in the 2011 Q2 Quarterly Bulletin explains that the fall in housing equity withdrawal - and move to injections of housing equity - since the financial crisis is likely to reflect a fall in the number of housing transactions, with little sign that households in aggregate are making an active effort to pay down debt more quickly than in the past.

David Birne, an insolvency practitioner at HW Fisher & Company chartered accountants comments:

"The great debt paydown continues, if at a slightly slower rate than the fourth quarter of 2010. The latest quarterly figure could well reflect a reduction in disposable income, which is unsurprising given the state of the economy.
 
"The reduction of mortgage debt is always a good thing for the individual household but when it happens on such a scale and over such a time period it can have major ramifications for business, as less money makes it onto the high street.
 
"The paydown of debt is a double-edged sword.
 
"Consumers battening down the hatches and paying down their mortgages is one of the main reasons the high street is struggling as it is.
 
"In many cases, people have no option other than to pay down their mortgages as they will have insufficient equity to take anything out anyway.
 
"The days of the house doubling up as a cash machine are well and truly over.
 
"With interest rates at their current negligible level and inflation so high, borrowers know that they are better off paying down their mortgages with any extra cash than putting money into a savings account."