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House prices boom brings £5.6trillion stash of wealth in Britain's homes - but mortgage crunch means no cashing in

Published 06th Jun 2012

Huge house price inflation means Britain's property goldmine is worth £5.6trillion, with almost a third of it stashed in the homes of the South East, according to a new report.

But while the paper value of our homes has barely been dented by the financial crisis, the mortgage crunch means Britons are no longer able to use them as the cash machines they once were.

Despite low interest rates, much tougher lending conditions mean families can no longer pull money out their homes as they rushed to do in the remortgage boom in the decade before house prices peaked in 2007.

Research from property website PrimeLocation claims that there is £5.6trillion worth of residential property in Britain - although this has been calculated on asking prices which can be notoriously optimistic.

The study also fails to take into account mortgage debt, which greatly reduces the chunk of their homes that people actually own.

The PrimeLocation report delivers a much larger estimate of the value of the nation's properties than a wider-reaching exercise by Lloyds TSB Private Banking recently, which put the total value at £3.9trillion.

It said that once mortgage debt was stripped out, housing wealth stood at £2.6 trillion.

The report highlights the vast imbalance created by the house price boom, with the south of England hit by what some see as a blessing and others a curse.

Here high house prices deliver theoretical wealth to existing homeowners, but hamper movement and lock out first-time buyers and young families from buying properties in the areas they grew up in.

PrimeLocation says the South East holds the greatest property wealth on a regional level, accounting for nearly a third (30%) of the UK’s total, with homes are worth £1.65 trillion.

It pips the capital to top spot, with London's smaller size pushing it into second with just over £1 trillion of property wealth.

Buckinghamshire, East Sussex, Hampshire and Kent all feature in the top 10 counties by property wealth per head. London comes in second with just over £1 trillion, while the South West completes the top three with property wealth of £488 billion.

For many the theoretical value of their homes is now an untappable resource, as banks and building societies are rationing lending and will only offer the best rates to those with big deposits or equity and a good credit rating.

The benchmark figure for the best mortgage rates is a 25 per cent deposit or equity, a far cry from the pre-2007 lending boom when homeowners could access top mortgage deals with as little as five per cent equity.

During the house price boom many homebuyers extended mortgages, remortgaged to new lenders, or even took out second mortgages to unlock the cash in their homes to boost their standard of living, buy new cars, invest in buy-to-let and take exotic holidays. This was a major driver of Britain's booming consumer economy.

Pensioners also borrowed against their homes through the controversial and ill-fated Home Income Plans, which left many penniless and at risk of losing the roof over their heads.

Source: ' ThisIsMoney '

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