By Melissa Davey of the Bank’s Structural Economic Analysis Division.
Mortgage equity withdrawal is borrowing that is secured on the housing stock but not invested in it, so it represents additional funds available for reinvestment or to finance consumption spending. Mortgage equity withdrawal was an important source of finance in the 1980s. But it fell back sharply in the 1990s, and remained negative for much of the decade. This article discusses the motivation for and the effects of mortgage equity withdrawal, using evidence from a recent consumer survey carried out for the Bank of England and the Council of Mortgage Lenders.