British homeowners repay record amount off mortgage debt

Permalink: British homeowners repay record amount off mortgage debt
by Kay Murchie

Figures have revealed today that historically low interest rates have led British homeowners to repay a record £8.1 billion off their mortgages in the first three months of the year.

According to the Bank of England, the £8.1 billion is the largest amount that have ploughed into their houses since records began almost 40 years ago and takes the total to £76 billion for the 12 months to the end of March.

“The hedonistic days of living the good life and borrowing against the value of your property are a distant memory. Homeowners now recognise that this is the time to batten down the hatches and reduce their debt rather than live on credit,” according to Ashley Brown of mortgage broker Moneysprite.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, added that he wasn’t surprised by the figures, “given the fall in house prices over the period”.

Meanwhile, equity release has been being negative for the fourth consecutive quarter.

Equity release is a scheme designed to allow homeowners to release cash from the value of their property but equity withdrawals have been declining from a high since the last quarter of 2003.

Since the market peaked in summer 2007, house prices have fallen by around 20% and this means many homeowners do not have sufficient equity left in their property for them to withdraw.

In related news, Moneyfacts have revealed that 90% loan-to-values appear to be returning to the mortgage market.

At the beginning of July there were 119 mortgage deals available which asked for a 10% deposit. While this is far less than this time last year, it is creeping up from the 101 such deals at the start of June.