Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Credit crunch hits cash-strapped home-owners

11.12.2008
Homeowners have drawn on their biggest asset, the roof over their heads, not to fund ‘champagne moments’ but to get through hard times; that’s the finding of a new study by Durham University.

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.”

Claire Whitelaw | alfa
Further information:
http://www.esrc.ac.uk
http://www.durham.ac.uk

More articles from Business and Finance:

nachricht Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Researchers develop method to transfer entire 2D circuits to any smooth surface

What if a sensor sensing a thing could be part of the thing itself? Rice University engineers believe they have a two-dimensional solution to do just that.

Rice engineers led by materials scientists Pulickel Ajayan and Jun Lou have developed a method to make atom-flat sensors that seamlessly integrate with devices...

Im Focus: Three components on one chip

Scientists at the University of Stuttgart and the Karlsruhe Institute of Technology (KIT) succeed in important further development on the way to quantum Computers.

Quantum computers one day should be able to solve certain computing problems much faster than a classical computer. One of the most promising approaches is...

Im Focus: Substitute for rare earth metal oxides

New Project SNAPSTER: Novel luminescent materials by encapsulating phosphorescent metal clusters with organic liquid crystals

Nowadays energy conversion in lighting and optoelectronic devices requires the use of rare earth oxides.

Im Focus: A bit of a stretch... material that thickens as it's pulled

Scientists have discovered the first synthetic material that becomes thicker - at the molecular level - as it is stretched.

Researchers led by Dr Devesh Mistry from the University of Leeds discovered a new non-porous material that has unique and inherent "auxetic" stretching...

Im Focus: The force of the vacuum

Scientists from the Theory Department of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science (CFEL) in Hamburg have shown through theoretical calculations and computer simulations that the force between electrons and lattice distortions in an atomically thin two-dimensional superconductor can be controlled with virtual photons. This could aid the development of new superconductors for energy-saving devices and many other technical applications.

The vacuum is not empty. It may sound like magic to laypeople but it has occupied physicists since the birth of quantum mechanics.

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

New Plastics Economy Investor Forum - Meeting Point for Innovations

10.12.2018 | Event News

EGU 2019 meeting: Media registration now open

06.12.2018 | Event News

Expert Panel on the Future of HPC in Engineering

03.12.2018 | Event News

 
Latest News

Small but ver­sat­ile; key play­ers in the mar­ine ni­tro­gen cycle can util­ize cy­anate and urea

10.12.2018 | Life Sciences

New method gives microscope a boost in resolution

10.12.2018 | Physics and Astronomy

Carnegie Mellon researchers probe hydrogen bonds using new technique

10.12.2018 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>