Housing Equity Withdrawal

Housing Equity Withdrawal

Housing Equity Withdrawal: Source: B of E

This graph shows the decline in housing Equity withdrawal since UK house prices started to fall.

Housing equity withdrawal (MEW) is new borrowing secured on dwellings that is not invested in the housing market (e.g. not used for house purchase or home improvements). From Q1 2007 this is called Housing equity withdrawal (HEW) rather than its old name of Mortgage Equity Withdrawal.

When House prices are rising people can remortgage their house

Suppose someone buys a House for £100,000 with a 10% deposit and £90,000 mortgage. If the house price rose to £150,000, banks might be willing to lend a mortgage equal to 90% of the new value. Therefore the homeowner could take out a mortgage for £135,000. Therefore, the homeowners gets a new mortgage for £135,000 giving them an extra £45,000 to spend (e.g. buy luxury items such as a new car or yacht.)

When house prices are falling people can no longer borrow extra. But, people may seek to overpay their mortgage to help reduce the amount that they owe.

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