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Homeowners are increasingly using equity release schemes to borrow money against the value of their home. According to figures from the Bank of England, an estimated £14.6bn was released in this way during the last quarter of 2006.
It seems that many homeowners are happy to use the equity in their property to fund other projects, despite higher interest rates in recent months. The money borrowed is often used for home improvements, or to repay other higher interest debts such as credit cards and unsecured loans. Experts suggest that the increase in this type of borrowing will also help boost consumer spending on the high street. The continuing strength of the housing market is therefore good news for retailers.
On a cautious note, economists warn that if house prices were to drop then some households may find themselves in difficulty if they have overstretched their finances.
However, in the short term house prices are not expected to fall. Latest predictions from the Northern Rock bank suggest that the mortgage market will continue to grow in 2007. Although interest rates are rising, they are still low compared to historical figures and the bank expects house prices to increase further. Net lending by the Northern Rock increased by 34% in the first quarter of this year.
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