Borrowing against property for consumption has become a way

Borrowing against property for consumption has become a way of life for many people and is largely made possible by rising house prices.Total mortgage debt is now over £1 trillion (£1,000 billion).A significant part of the increase in the level of mortgage borrowing has come from people releasing equity for consumption.Cash can be taken out of residential property in various ways:outright sales,remortgaging and by taking a bigger mortgage than needed when moving to a new home.All this borrowing is called “mortgage equity withdrawal” (MEW) and is the amount of money people are taking out of their homes for non-building purposes – mainly for consumption.
For the fourth quarter of 2005 the figure was £11.8 billion according to the Bank of England’s latest release on the subject.This is just part of a surge in such new borrowing which began rising in 2001.Assuming this level of borrowing for a whole year and putting it in terms of our “typical” four-person family they are borrowing an extra £3,150 against their home each year for spending.Of course if this is the average amount it means that very many people must be borrowing a lot more.