According to figures published by the Bank of England, British homeowners repaid £7bn of mortgage debt in the second three-month period of 2009, the Telegraph has reported.
The Bank revealed that the rate at which people are repaying their mortgages ‘is broadly similar’ to Q1 2009, when homeowners made net mortgage repayments of £7.3bn.
The paper reported that ‘recent falls in house prices and the economic downturn have put people off taking money out of their property, leading to equity withdrawal being negative for the fifth quarter in a row’.
The figures show that households spent the equivalent of 2.9% of their income (after tax) on paying down their mortgage debts.
Although it’s good news that people are working on their debt management skills and clearing their debts, it’s bad news for ‘beleaguered retailers’.
Withdrawing equity allows homeowners to ‘cash in’ on rising house prices by adding to their mortgages to turn some of the rise in the value of their property into cash. But while some people feel fairly confident about increasing the size of their mortgage when house prices are high, they are ‘less inclined’ to do so when prices are on their way down and unemployment is on the rise.
Howard Archer, chief economist at Global Insight, said: “Extremely low savings rates have made it much more attractive for many people to use any spare funds that they have to reduce their mortgages.
“On top of this, it is clear that many people are keen to improve their personal balance sheets given higher debt levels and the worrying economic situation.”
The collateral, however, is the garnishing product if the borrower cannot repay his mortgage. Ivas