Homeowners unlocked the lowest amount of money from their properties for nearly seven years in the first three months of 2008 amid soaring mortgage rates and falling house prices, figures have shown.

Consumers withdrew £5.04 billion of equity in the first quarter, down nearly a third on the £7.37 billion taken out in the final quarter of last year, according to Bank of England data.

The figure is almost three times less than the £13.89 billion withdrawn in the first quarter of 2007 and the lowest seen since the beginning of 2001.

The money unlocked represented 2.2% of people's post-tax income, down from 3.2% in the previous quarter.

Equity release, under which people can borrow money against the value of their home, had been booming in recent years on the back of rising house prices and low interest rates.

But the credit crunch has seen mortgage rates rise despite interest rate cuts from Bank of England policymakers, while lower house prices have put homeowners off withdrawing money from their properties.

House price figures from Nationwide Building Society yesterday revealed that values fell for the eighth month in a row during June, while annual growth fell at its fastest rate since the 1990s crash.

The equity release figures will add to concerns over consumer confidence, leaving already hard-pressed consumers with less cash to spend, said Howard Archer, chief economist at Global Insight.

He said: "Sharply reduced housing equity withdrawal will add 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, tighter and, now, rising unemployment.

"This reinforces belief that we are in for an extended period of consumer retrenchment."

At its peak of popularity four years ago, equity release was used by homeowners to spend on home improvements or even holidays, with historically low interest rates seeing more than £17 billion withdrawn from properties at the end of 2003.

But housing equity withdrawal is also used by consumers to reduce debts, invest in other financial assets and to top up pensions.

Pensioners in particular use equity release to boost their income in retirement, while retaining ownership of their home.

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