Last year was the year of investing into your home, not spending your equity – great news, proving people are in good stead for the year ahead.

The Bank of England estimate for home equity withdrawal for the last quarter of 2008 is minus £8bn. The negative figure implies that borrowers are investing into their homes rather than spending equity – that compares with a revised estimate of a net injection into housing equity of £5.9bn in the third quarter of 2008.

Rising house prices over this decade has encouraged people to refinance or take out secured loans to free up cash for other purposes, but housing equity withdrawal turned negative in the second quarter of 2008, meaning people are trying to save more than they spend.

Simon Rubinsohn, chief economist of the Royal Institute of Chartered Surveyors says: "Housing equity withdrawal fell for the third consecutive quarter in the final three months of 2008 with the £8bn drop amounting to a hefty 3.3% of post tax income. The constraint on household borrowing from the loss in value of residential property contributed in no small way to the one per cent decline in consumer spending in fourth quarter.

"The likelihood is that despite tentative signs of a stabilising in activity in the residential market, homeowners will find it difficult to resume extracting equity from property for the foreseeable future."

This means it's time to save, invest in your home and begin building up your equity. Talk to your mortgage adviser about improving your credit rating, your equity and your potential for the future.

SOURCE: BoE, RICS, 02/04/09

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