British homeowners, accustomed to the frenetic house price hikes enjoyed over the last 18 months, are taking more equity out of their homes to spend on other items, such as cars, according to new data from the Bank of England.
The amount people were using to pay down their mortgages, known as a "housing equity injection", fell as property prices rose in the three months to June, and confidence in the housing market soared.
The UK's central bank reported that for a fifth successive quarter homeowners spent less on paying off the value of their home.
June saw the lowest equity injection since the first quarter of 2012 at £10.8bn, down from £11.5bn in the first quarter of 2014, £12.4bn in the fourth quarter of 2013 and a record high of £13.6bn seen in the first quarter of 2013.
On the flipside - the amount withdrawn from the value of British homes "housing equity withdrawal" is trending upwards.
The net injection of housing equity accounted for 3.5pc of income in the second quarter of 2014, which was the lowest ratio since the first quarter of 2010, and markedly down on the peak of 4.7pc in the first quarter of 2013.
This shows that spending patterns are changing from the cautious behaviour seen in the aftermath of the recession.
Before the last housing market crash, house prices were rising robustly and as a result people took equity out of their homes [often in the form of a remortgage] to support consumer spending - such as the purchase of a new car," explained Howard Archer, chief economist at IHS Global Insight.
"During the recession this practice came to an end as house prices were falling and taking money out of a house's value became far less attractive."
At this point the Bank of England saw an uptick in the UK's net housing equity injection, as people started to use any spare cash or bonuses to reduce their debt on their home.
When mortgage rates were reset at historic lows (0.5pc), people started to pay off more capital.
"On the face of it, still relatively high net injection of housing equity in the second quarter of 2014 suggests that there is a pretty marked desire and perceived need of many people to improve their personal financial balance sheets given elevated debt levels," said Mr Archer.
"However, recent markedly increased house prices and much improved consumer confidence overall may be causing an increasing number of people to engage in housing equity withdrawal. This would reduce net injection of housing equity."
As confidence grows, partly due to positive economic outlook and increased employment, and partly due to house price rises, people, banking on further increases, are releasing equity to buy items such as cars, he explained.
This new data will fuel fears that people are withdrawing equity as the housing market is on the brink of price falls.
The announcement from the Bank of England ties with recent data from the Mortgage Advice Bureau, which saw the greatest annual remortgaging activity in August with applications up 19pc year-on-year while purchase applications were up 12pc.
Recovering house prices meant that the typical value of a home being remortgaged in August was up 24pc year-on-year (from £257,342 in August 2013 to £319,320).
As a result, applicants were able to put up 43pc more equity in August 2014 (£151,489, up from £105,845 in August 2013).
This spurt of activity of activity comes ahead of expected interest rate rises next spring - as signalled by the governor of the Bank of England, Mark Carney (pictured below)- as homeowners race to fix their repayment rate.
