UK homeowners increased the stake in their homes by ?3.2 billion in the first quarter of 2010, but this was slightly down on the ?3.4 billion increase of quarter 4 2009.
The figures from the Bank of England showed that homeowners continued to pay off their mortgages in early 2010, and higher deposits demanded by lenders also influenced the figures. Before the credit crunch hit, many UK homeowners were taking equity out of their homes, but that trend has been reversed in the last two years, with an equity increase of ?38.3 billion. In the two years before that borrowing against home values had stood at ?87 billion.
The height of equity withdrawal was in 2003 when people were borrowing money against the value of their homes to supplement their post-tax income by nearly 9 per cent on average across the whole UK population.
The marked change in attitude meant that in the first quarter of 2009 around 1.3 per cent of post-tax income has been used to reduce mortgage debt. Factors like low interest rates and the fear of the long-term impact of the economy have led people to pay off their mortgages rather than increase their borrowing. Many people have been overpaying on their mortgage repayments.
Howard Archer of IHS Global Insight told BBC News: “The eighth successive, and still marked, net injection of housing equity in the first quarter of 2010 is the consequence of the ongoing desire of many people to improve their personal balance sheets. Furthermore, extremely low savings interest rates have made it much more attractive for many people to use any spare funds that they have to reduce their mortgages.”
