Using your home as a credit card

Surging property prices have led to a strong rise in home equity lending, figures for the first three months of 2004 show it's doubled over the same period in 2003. Home buyers are borrowing against the increased value of their properties and freeing up cash to reinvest in renovations or pay for holidays and cars. But financial advisers warn that home equity loans are like giant credit cards with lower interest rates. The temptation to get easy credit may lead to homeowners running down their equity to spend on frivolous short-term consumables. However, such borrowing is certainly cheaper than credit cards or personal loans. The Australian Consumers' Association warns that people nearing retirement are particularly vulnerable to overspending. When homeowners decide to draw down equity, they increase debt which could be a problem at retirement.