A DECADE-long run of housing equity withdrawal in the UK came to a shuddering halt in the second quarter of this year, official data revealed yesterday, signalling yet another serious squeeze on beleaguered consumers' spending power.

After 10 years of equity withdrawal, people's investment in housing exceeded mortgage borrowing by £2.76bn in the second quarter as tumbling house prices reduced their ability to borrow more against properties, and lenders demanded greater deposits for home loans amid the global credit crisis.

This £2.76bn represented the biggest net injection into housing equity since the Bank of England data series began in 1970. The three months to June is the first period in which there has been a net inflow into housing equity in the UK since 1998.

Paul Dales, UK economist at consultancy Capital Economics, said the housing equity figure continued the "gloomy tone" of recent economic data.

He said: "This is not too surprising in the current environment, where the availability of mortgages has fallen and plummeting house prices have reduced the demand for borrowing."

However, highlighting the knock-on economic impact, Dales added: "One of the key supports of household spending has now been completely wiped out."

As recently as the third quarter of last year, UK housing equity withdrawal amounted to £11.3bn or 4.9% of post-tax income.

The injection into housing equity in the second quarter amounted to 1.2% of post-tax income.

Howard Archer, chief UK economist at consultancy Global Insight, said: "Higher mortgage rates, markedly tighter credit conditions and falling house prices have increasingly reduced the attractiveness of, and scope for, housing equity withdrawal, to the extent that householders made a net repayment.

"Negative housing equity withdrawal adds to the mounting pressure on consumer spending already coming from modest disposable income growth, rising utility bills, elevated food prices, tighter lending conditions, higher mortgage rates, increased debt levels and, now, rising unemployment. This reinforces belief that we are in for an extended period of serious consumer retrenchment."

Building society Nationwide said on Thursday that the average UK house price fell by a further seasonally-adjusted 1.7% during September. The average price was 12.4% lower than in September 2007 - the steepest year-on-year fall since comparable records began in 1991.

House prices in Scotland tumbled by a seasonally- adjusted 5% during the third quarter alone to stand 7.1% lower than in the three months to September 2007.