Housing Equity Withdrawal in the United Kingdom

Abstract

Housing equity is the value of house property owned by individuals minus the amount of debt secured on it. Housing equity withdrawal (HEW) most commonly takes the form of increasing the amount of debt secured on house property relative to its value. This process is commonly referred to as mortgage equity withdrawal, as it depends on mortgage borrowing. Essentially it is borrowing against the value of privately owned dwellings. It can take several forms. Over-mortgaging works through increasing mortgage debt relative to dwelling values when someone sells a mortgaged house and buys another. Remortgaging is replacing a mortgage loan by a larger loan. Further advances are additions to an existing mortgage. The first is a by-product of selling one house to buy another, usually through a move. The other two do not depend on a move and so can be termed mortgage equity withdrawal in situ. Mortgage equity withdrawal depends on institutions financing house purchase, and so grew as financial markets were liberalised. Information about HEW comprises estimates of the different forms (gross flows), and a net measure, net lending secured on dwellings minus investment in dwellings. This measure can be derived from current financial and national income statistics, and is published by the Bank of England as an economic indicator. It can be positive or negative, the latter in a housing market slump.