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.”
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Physicists have developed a new technique that uses electrical voltages to control the electron spin on a chip. The newly-developed method provides protection from spin decay, meaning that the contained information can be maintained and transmitted over comparatively large distances, as has been demonstrated by a team from the University of Basel’s Department of Physics and the Swiss Nanoscience Institute. The results have been published in Physical Review X.
For several years, researchers have been trying to use the spin of an electron to store and transmit information. The spin of each electron is always coupled...
What is the mass of a proton? Scientists from Germany and Japan successfully did an important step towards the most exact knowledge of this fundamental constant. By means of precision measurements on a single proton, they could improve the precision by a factor of three and also correct the existing value.
To determine the mass of a single proton still more accurate – a group of physicists led by Klaus Blaum and Sven Sturm of the Max Planck Institute for Nuclear...
The research team of Prof. Dr. Oliver Einsle at the University of Freiburg's Institute of Biochemistry has long been exploring the functioning of nitrogenase....
A one trillion tonne iceberg - one of the biggest ever recorded -- has calved away from the Larsen C Ice Shelf in Antarctica, after a rift in the ice,...
Physics supports biology: Researchers from PTB have developed a model system to investigate friction phenomena with atomic precision
Friction: what you want from car brakes, otherwise rather a nuisance. In any case, it is useful to know as precisely as possible how friction phenomena arise –...
21.07.2017 | Event News
19.07.2017 | Event News
12.07.2017 | Event News
21.07.2017 | Earth Sciences
21.07.2017 | Power and Electrical Engineering
21.07.2017 | Physics and Astronomy