December 05, 2011
Despite millions of households struggling to get a financial footing in the current economy, Brits still managed to reduce their mortgage debt by a record £9.1 billion during the second quarter of 2011.
Official figures have shown that a sluggish housing market, low returns on savings and economic uncertainty have stopped people from taking cash out of their homes, leading many to pay off their mortgages at an accelerated rate.
According to analysts, the record net injection of housing equity reflected people's desire to improve their personal finances and cut their debt, against a background of high unemployment. This, coupled with a base rate at a historic 0.5% low, has seen many people using spare cash to reduce their mortgages.
Equity withdrawal accounted for 3.1% of people's post-tax income during the second quarter of 2010, but during the second quarter of this year they spent the equivalent of 3.5% of their take-home pay on their mortgage.
"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,” said Howard Archer, Chief European and UK Economist at IHS Global Insight.
"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."
