UK homeowners continue to increase equity in their homes

Official figures have revealed that homeowners in the UK are continuing to strive to increase the equity in their homes by overpaying on their mortgages. Equity levels have plunged over the past few years as a result of the global financial crisis and plummeting property prices.

According to figures homeowners in the UK increased the equity in their homes by £3.2 billion in the first three months of this year, and by £3.4 billion in the final three months of last year. The figures were released by the Bank of England, and showed that equity levels had increased as a result of homeowners overpaying on their mortgages whilst the base interest rate was still at an all time low of 0.5 percent, and also due to lenders demanding far higher deposits from borrowers.

In the past two years equity has not been withdrawn from homes in the UK, and during that period homeowners have increased their equity levels by £38.3 billion. In the two years before this UK homeowners borrowed £87 billion against the equity in their homes, which resulted from inflated property prices.

The figures from the Bank of England have shown how trends amongst homeowners in the UK have changed over recent years as a result of changes that have been seen in the property and financial markets. Since 1998 many people have borrowed money against the equity in their homes for purposes such as large purchases or debt consolidation, and in the decade from 1998 borrowed a total of £327 billion.

Economist Howard Archer from Global Insight said: “The eighth successive, and still marked, net injection of housing equity in the first quarter of 2010 is the consequence of the ongoing desire of many people to improve their personal balance sheets. Furthermore, extremely low savings interest rates have made it much more attractive for many people to use any spare funds that they have to reduce their mortgages.”