The door slams shut on tapping homes for income

EQUITY RELEASE

The amount of money that people are borrowing on the back of the value of their home is falling sharply. Figures for equity release were at their lowest level since 2001 in the first quarter of this year, as plummeting house prices and tighter credit conditions took hold.

Data released by the Bank of England shows that housing equity withdrawal was just 5bn in the first three months of 2008.

The sum borrowed was nearly two-thirds less than the 14bn for the same period last year, equivalent to a reduction from 6.3 per cent of a household's post-tax income at the start of 2007 to 2.2 per cent now.

Howard Archer at the financial analyst Global Insight said: "Sharply reduced equity withdrawal will add to the pressure on consumer spending already coming from modest disposable income growth, rising utility bills, elevated food prices, tighter lending conditions, higher mortgage rates, in-creased debt levels and rising unemployment."

Meanwhile, Nationwide released figures showing a fall in house prices for the eighth consecutive month in June. They now stand at more than 7 per cent below last year's peak.

Prices fell by 0.9 per cent last month after a 2.5 per cent drop in May, which was the sharpest drop since the building society's records began in 1991.

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