Homeowners make record mortgage repayments

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The Independent Online

British homeowners reduced their total mortgage debt by another £6.1bn over the three months to the end of September, the tenth successive quarter in which repayments were larger than new borrowing.

The figure for the third quarter – the highest since the beginning of 2009 – also suggests that the trend is accelerating, with consumers anxious to reduce their borrowing during a difficult economic period.

The £6.1bn net repayment compares with a lower £5.8bn repayment seen in the second quarter of the year, and £5.3bn in the first three months of 2010.

Cumulatively, the net repayments made since the second quarter of 2008 now stand at £49.7bn, in stark contrast with the persistent net withdrawals consistently seen over the previous decade.

Howard Archer, head of UK economics at IHS Global Insight, said the figures "indicate that there is an ongoing desire and perceived need of many people to improve their personal balance sheets".

While the reduction of personal debt, which remains close to record levels in the UK, will be seen as positive news by many, the data is bad news for consumer-facing industries, which had previously been the beneficiaries of spending financed by equity withdrawal.

Mr Archer added: "The ongoing – and increased – net injection of housing equity is adding to the constraints on consumer spendingincluding high unemployment, negative real wage growth and high debt levels." Despite the 0.5 per cent base rate, the trend is regarded as likely to continue into next year, with house prices falling further and credit conditions remaining tight.