New figures have shown that Britons managed a record ?8 billion reduction in mortgage debt during the final quarter of last year.
For the third quarter running equity withdrawal was in the negative and as a consequence, the Bank of England has said equity has had the biggest net injection since records began in 1970. Since 1998 housing equity withdrawal has been in the negative only three times and the rate that people were repaying their mortgage was boosted from the third quarter, with ?5.9 billion of net repayments being made.
This year, people have been focusing on repaying their mortgage, unlike last year, where they unlocked ?6.7 billion from their properties to fund large purchases. Despite this being good for homeowners, it has turned out to be something retailers could do without.
In the first quarter of 2008, equity withdrawal accounted for 2.9 per cent of people?s post-tax income, which the figure was positive during the last period. This changed to negative though when people spent 3.3 per cent in reducing their mortgage in the fourth quarter.
Wednesday?s figures didn?t come close to the record ?17.12 billion of unlocked equity that was reached in 2003.
Equity withdrawal can provide an advantage to homeowners who experience rising house prices. This enables them to increase their mortgage and then convert some of that value into cash. The cash is then used for either big purchases like cars, holidays or home improvement or to consolidate debt.
