Remortgaging "disaster" uncovered by academics' report

12/12/2008

Homeowners who remortgaged their own properties in order to fund their own day-to-day living costs such as food and fuel bills face big problems in the credit crunch, a new report has shown.

Durham University academics said that this way of funding spending was common in 2005 - with more than a third generating cash in this way, the Guardian reports.

However, house prices have dropped significantly since the market hit a peak last summer.

Figures from lenders suggest that around 15 per cent has been wiped off the value of UK homes in the past 12 months.

Mortgage firms have also restricted their lending in the financial crisis - reducing the possibility of remortgaging a property cheaply.

Susan Smith at Durham University commented: "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 homeowners cash in on their homes in boom times: to support children, smooth over a fall in income or meet the costs of relationship breakdown."

Tags; Housing Debt and Bills, Young Family Finances,

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