Who Withdraws Housing Equity and Why?

Abstract

The decision to extract home equity is examined using household‐level data for the UK over 1993–2003. At its peak during the period, around 1‐in‐10 homeowners withdraw equity per year. Little is known about this financial decision. I find that the equity withdrawal decision conforms to predictions from the standard life‐cycle framework and models that predict its use as a financial buffer. The paper also estimates responses to the large house price appreciation and significant reductions in mortgage rates seen during the period.