The researchers, funded by the Economic and Social Research Council and the Arts and Humanities Research Council, are reporting their findings to an international audience today. They believe their work will fuel concerns that millions of homeowners risk losing billions of pounds if the value of the housing market were to drop or collapse like it did in the late eighties.
Ironically the initial findings of the two year ‘Banking on Housing; Spending the Home’ project highlight that just under a third of mortgage holders do not even think of, or use, their owned homes as a means of storing or accumulating wealth (29%), despite the fact that almost two thirds (59%) of these homeowners have no other savings investments apart from their home and pension.
However, the study based on 150 detailed telephone interviews, and over 30 in depth follow ups, with a cross-section of mortgage-holders in England also shows that nearly a quarter (23%) of owner-occupied households are making the most of the capital in their home and deliberately balance investments between home ownership and a more diversified financial portfolio.
Durham University’s Professor of Geography, Susan Smith commented: “This study really draws attention to the precarious position of the majority of English homeowners’ savings. While many would think it strange to invest everything they have into one particular company, to all intents and purposes more than seven million people1 in England are doing just this by ‘banking on housing’. In fact, they are investing almost everything they have into just one building, in one neighbourhood, in one town, in one region despite the hindsight of the recent housing market collapse.
“We found that most people understood and made good use of their mortgages to free up housing wealth to spend on other things. Most people agree that home equity should not be spent rashly but almost everyone we spoke to views their home as a financial buffer or safety net that they can cash in on if times get tough. If the housing market did downturn and these safety nets disappeared the political, economic and social impact could be devastating.”
The academics believe there are several policy implications that will arise out of this project including the potential need for guidelines on how much to reinvest into housing to safeguard the future value and quality of the housing stock. There is also the question of what, if people are using housing wealth as a safety net now, they will turn to in the future; and the issue of how best to manage, or hedge, the risks of having all your eggs in a single housing basket.
David Elms, Chief Executive from IFA Promotion, the organisation that promotes the benefits of independent financial advice commented: “It is worrying that so many people have so little savings outside the equity in their family home. Everybody needs some savings to see them through a “rainy day”, such as illness or being out of work. The danger is, of course, that people will be tempted to borrow more to tide them over, exactly at the time when they shouldn’t really be increasing their debt. It is important for people to have a diversified range of both long and short term savings.”
1. Based on figures from the Office of the Deputy Prime Minister 2003 which states that there are 20,900,000 million households in England and figures from the 2001 Census of 68% of English households being owner-occupied.
Media and Public Affairs Team | alfa
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
More and more automobile companies are focusing on body parts made of carbon fiber reinforced plastics (CFRP). However, manufacturing and repair costs must be further reduced in order to make CFRP more economical in use. Together with the Volkswagen AG and five other partners in the project HolQueSt 3D, the Laser Zentrum Hannover e.V. (LZH) has developed laser processes for the automatic trimming, drilling and repair of three-dimensional components.
Automated manufacturing processes are the basis for ultimately establishing the series production of CFRP components. In the project HolQueSt 3D, the LZH has...
Reflecting the structure of composites found in nature and the ancient world, researchers at the University of Illinois at Urbana-Champaign have synthesized thin carbon nanotube (CNT) textiles that exhibit both high electrical conductivity and a level of toughness that is about fifty times higher than copper films, currently used in electronics.
"The structural robustness of thin metal films has significant importance for the reliable operation of smart skin and flexible electronics including...
The nearby, giant radio galaxy M87 hosts a supermassive black hole (BH) and is well-known for its bright jet dominating the spectrum over ten orders of magnitude in frequency. Due to its proximity, jet prominence, and the large black hole mass, M87 is the best laboratory for investigating the formation, acceleration, and collimation of relativistic jets. A research team led by Silke Britzen from the Max Planck Institute for Radio Astronomy in Bonn, Germany, has found strong indication for turbulent processes connecting the accretion disk and the jet of that galaxy providing insights into the longstanding problem of the origin of astrophysical jets.
Supermassive black holes form some of the most enigmatic phenomena in astrophysics. Their enormous energy output is supposed to be generated by the...
The probability to find a certain number of photons inside a laser pulse usually corresponds to a classical distribution of independent events, the so-called...
Microprocessors based on atomically thin materials hold the promise of the evolution of traditional processors as well as new applications in the field of flexible electronics. Now, a TU Wien research team led by Thomas Müller has made a breakthrough in this field as part of an ongoing research project.
Two-dimensional materials, or 2D materials for short, are extremely versatile, although – or often more precisely because – they are made up of just one or a...
28.04.2017 | Event News
20.04.2017 | Event News
18.04.2017 | Event News
28.04.2017 | Medical Engineering
28.04.2017 | Earth Sciences
28.04.2017 | Life Sciences