New Bank of England figures have revealed that homeowners in the UK repaid their mortgage loans
in the last quarter of 2010 at the fastest rate since records began. £7 billion of mortgage debt was
repaid in the final three months of 2010; the highest amount since records began in 1970.
Eleventh successive quarter of debt repayment
The Guardian reports that this ‘represents the largest net injection of equity on record’. The figure
of £7 billion was significantly higher than the £6.6 billion repaid in the previous quarter.
It is the eleventh successive quarter that there has been a net repayment of mortgage debt. This
means that, since the second quarter of 2008, borrowers have been repaying more in mortgages
than they have been taking out in loans. A total of £57.4 billion of mortgage debt has been repaid in
these eleven quarters.
This is compared to the previous eleven years where more people were withdrawing equity from
their homes. The first quarter of 2007 alone saw £13.8 billion of equity withdrawn from homes in
the UK.
Low savings rates and falling house prices result in debt repayment
Low interest rates have made it more attractive for people to use surplus money to pay off their
mortgage whilst it has been much harder to withdraw equity from property over recent years thanks
to falling house prices and tighter mortgage conditions.
Howard Archer, chief European and UK economist at IHS Global Insight, said: “The record figures
highlight the strong desire and perceived need of many people to improve their personal balance
sheets given high debt levels and serious concerns and uncertainties over the economic situation.
“The overall softening in house prices from their late-2007 peak has made housing equity
withdrawal less attractive. And of course, house prices have fallen anew overall in recent months,
which is likely to further encourage a net injection of housing equity in the near term at least.”
