A combination of cautious borrowers unwilling to take on more debt and lenders clamping down on capital raising through remortgaging is hitting mortgage equity withdrawals, the company said.

Around 85% of all remortgage applications through the service between June and August were customers switching deals to better rates as lenders clamped down on borrowers using housing equity to raise cash, data shows.

Only 4% of borrowers were able to withdraw equity to help consolidate debts while 3.5% raised money for home improvements and another 2.5% raised capital. Another 4.3% raised money to buy another property while the rest raised cash for their business.

Mortgage equity withdrawal which was running at £6.7bn a quarter at the start of 2008 has now gone into reverse as borrowers put money back into their homes. Recent Bank of England figures show a record £8.1bn was put into housing equity in the first three months of the year.

Evaluate Technologies said lenders are currently unlikely to consider remortgaging applications which are for debt consolidation as they are worried about customers running up debt problems.

Julie Speed, national accounts director at Evaluate Technologies, said: “Neither lenders nor borrowers are willing to take risks in the current market. Inevitably that means fewer applicants are even trying to withdraw equity.

“Just as the best new deals are reserved for those with 40% deposits, the same applies to homeowners aiming to raise cash even if they have perfect payment records and substantial equity.

“It’s fair to say that some lenders were lax in the past by enabling people to treat their homes as cash machines and the current tight credit situation has changed that dramatically.”

Applications through Evaluate Technologies in the past three months show 61% of customers are using savings to fund their deposit while 22% are relying on equity. Another 8% are using gifts from family.