Borrowers Reduce Mortgage Debt By GBP8bn

Thu, 02 Apr 2009

UK homeowners cut their mortgage debt by a record £8 billion during the last quarter of 2008, according to new figures from the Bank of England.

The amount of equity people withdrew from their homes between October and December was negative for the third quarter running, as homeowners made the biggest net equity injection since records began in 1970, the Bank said.

Housing equity withdrawal in the fourth quarter accounted for 3.3 per cent of Britain’s total post-tax income, and exceeded the £5.9 billion net repayments made by British homeowners in the third quarter of last year.

The surge in mortgage repayments is in stark contrast to last year, when homeowners unlocked £6.7 billion from their properties to fund large purchases.

As the recession deepens and fears over unemployment grow, mortgage borrowers are becoming anxious to increase the amount of equity held in their properties, while falling interest rates have helped those on tracker and standard variable rates to make regular overpayments.

Howard Archer, an economist at Global Insight, said: "Ever lower savings rates have made it increasingly more attractive for many people to use any spare funds that they have to reduce their mortgages . Hence, the increasing net injections of equity in the last three quarters of 2008."
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