Mortgage equity withdrawal is a much more popular and frequent event than previously thought. New figures show that borrowers haven’t just used their housing equity to splash out on holidays or cars; struggling households have borrowed against their homes to meet their basic needs like bringing up the kids.
Durham University researchers looked at the borrowing patterns of over 8000 households in the UK from 2001-2005. They found that in any one year, 2 in 5 homeowners ended up with higher mortgages than in the previous year, even though they had not moved home. Instead they had re-mortgaged or extended their existing home loan. On average, these households borrowed an additional £5000 to £7500 in a given year. Some of them tapped into as much as three-quarters of their home equity in this way.
Durham University housing expert Susan Smith said: “The Credit Crunch is a welfare disaster for struggling households who have previously relied on the option to borrow up against the value of their home.
“In the early years of this century we saw a form of self-administered welfare payment develop where home-owners cash in on their homes, in boom times: to support children, smooth over a fall in income, or meet the costs of relationship breakdown.”
The Durham research team - Dr. Beverley Searle and Professor Susan Smith – has linked up with Australia’s RMIT University to research and compare the mortgage choices of UK and Australian homeowners over the same four years (2001-2005). This was a period with rising house prices and easy credit and there are more similarities than differences in the two countries.
The research, funded by the Economic and Social Research Council, uses panel survey data that tracks the same households through every year. This ongoing study is monitoring what prompts households’ use of a growing range of flexible mortgages and low cost refinancing opportunities to draw from housing wealth, and release money to spend on other things.
The findings show that this facility – to borrow against housing wealth cheaply, easily and without moving home – is a factor in the recent escalation of personal debt. However, these findings also suggest that the popular perception of equity withdrawal is not always used for life’s luxuries - it’s used to meet more basic needs.
Professor Smith said “This suggest that the credit crunch is not just precipitating a crisis in the finance community; it could produce a crisis of welfare too. Without the option to use mortgages to channel housing wealth into spending money, families under pressure lose access to their most significant asset base for welfare and are forced to look at other ways of getting by.
“The figures show that housing equity withdrawal has provided a lifeline for struggling families but the credit crunch threatens what has become a new form of self-administered welfare.”
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik
The world's highest gain high power laser amplifier - by many orders of magnitude - has been developed in research led at the University of Strathclyde.
The researchers demonstrated the feasibility of using plasma to amplify short laser pulses of picojoule-level energy up to 100 millijoules, which is a 'gain'...
Staphylococcus aureus is a feared pathogen (MRSA, multi-resistant S. aureus) due to frequent resistances against many antibiotics, especially in hospital infections. Researchers at the Paul-Ehrlich-Institut have identified immunological processes that prevent a successful immune response directed against the pathogenic agent. The delivery of bacterial proteins with RNA adjuvant or messenger RNA (mRNA) into immune cells allows the re-direction of the immune response towards an active defense against S. aureus. This could be of significant importance for the development of an effective vaccine. PLOS Pathogens has published these research results online on 25 May 2017.
Staphylococcus aureus (S. aureus) is a bacterium that colonizes by far more than half of the skin and the mucosa of adults, usually without causing infections....
Physicists from the University of Würzburg are capable of generating identical looking single light particles at the push of a button. Two new studies now demonstrate the potential this method holds.
The quantum computer has fuelled the imagination of scientists for decades: It is based on fundamentally different phenomena than a conventional computer....
An international team of physicists has monitored the scattering behaviour of electrons in a non-conducting material in real-time. Their insights could be beneficial for radiotherapy.
We can refer to electrons in non-conducting materials as ‘sluggish’. Typically, they remain fixed in a location, deep inside an atomic composite. It is hence...
Two-dimensional magnetic structures are regarded as a promising material for new types of data storage, since the magnetic properties of individual molecular building blocks can be investigated and modified. For the first time, researchers have now produced a wafer-thin ferrimagnet, in which molecules with different magnetic centers arrange themselves on a gold surface to form a checkerboard pattern. Scientists at the Swiss Nanoscience Institute at the University of Basel and the Paul Scherrer Institute published their findings in the journal Nature Communications.
Ferrimagnets are composed of two centers which are magnetized at different strengths and point in opposing directions. Two-dimensional, quasi-flat ferrimagnets...
24.05.2017 | Event News
23.05.2017 | Event News
22.05.2017 | Event News
29.05.2017 | Life Sciences
29.05.2017 | Physics and Astronomy
29.05.2017 | Statistics