Mortgages paid down by record £9bn in quarter
Simon Read is Personal Finance Editor at The Independent. He edits the Saturday Your Money section and writes the Daily Money column and Wednesday’s Midweek Money section in i newspaper. He also writes for the news and business pages of the Independent and i newspaper and is a regular money commentator on TV station London Live. He has won numerous awards including Consumer Finance Journalist of the Year.
Thursday 01 December 2011
Homeowners pumped a record £9.1bn into reducing the debt on their properties in the second quarter, the Bank of England revealed yesterday.
It was the highest negative figure since comparable records began in 1970 and means the total amount owed on mortgages has fallen by £92.9bn since the height of the credit crunch.
Homeowners spent the equivalent of 3.5 per cent of their take-home pay on their mortgages during the three months to the end of September, the Bank said. The figure is a stark contrast to five years ago when property prices seemed to be on a permanent upward slant. In late 2006, homeowners took out the equivalent of 5.6 per cent of their take-home pay from their mortgages.
The trend for increasing the amount of equity homeowners have in their property has been gradually increasing since 2008. That is partly on the back of the flat or falling housing market, but also because of volatile stock markets and record low interest rates.
In other words, cash works harder reducing mortgage debt than in savings, even with the low standard variable rate environment of the past two years. However, Kate Reinold of the Bank of England's structural economics analysis division, said the record negative figures do not prove that householders are paying down debt more quickly than in the past. Writing in the the Bank's Quarterly Bulletin, Ms Reinold suggested that the slump in property market activity since the financial crisis had been the "key driver of the fall in equity withdrawal".
"Tighter credit conditions have led to a large reduction in the number of first-time buyers," she reported, adding that, in turn, fewer first-time buyers meant fewer housing chains.
"Housing chains lead to large equity withdrawals, so the lower number of housing market transactions, all else equal, will have led to lower equity withdrawals," Ms Reinold wrote.
She also pointed out that the tighter credit conditions may have meant that some homeowners have become less able to draw down on their housing equity than in the past. In other words, they may have been refused permission to borrow against their home.
- 1 Lord Sewel quits: Peer 'boasts of having sex with BBC presenter and seeing 13 mistresses'
- 2 Kenya President Uhuru Kenyatta clashes with President Obama on LGBT equality: ‘Gay rights is really a non-issue’
- 3 Topshop pulls 'ridiculously skinny' mannequins after being shamed by customer on Facebook
- 4 Five-year-old boy forced classmate to simulate oral sex at primary school, claims mother
- 5 Black and ethnic minority people twice as likely to be hit by Tory cuts than white people, report finds
Mystery over deaths of 3,000 Napoleonic soldiers in mass grave has been solved
Boris Johnson apologises after giving his wife a 'backie' on his bike on the streets of London
Black and ethnic minority people twice as likely to be hit by Tory cuts than white people, report finds
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
Rolling Stones guitarist Keith Richards, 71, still enjoys 'an early morning joint' for breakfast
The 9 charts that show the 'left-wing' policies of Jeremy Corbyn the public actually agrees with
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
The last thing Labour needs is a leader like Jeremy Corbyn who people want to vote for
What the Labour party could look like under Jeremy Corbyn
I am the Jeremy Corbyn supporter that many will tell you doesn't exist
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
iJobs Money & Business
£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...
£40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...
£30000 - £35000 per annum + benefits : Ashdown Group: Finance Accountant - Fin...
£90000 - £98000 per annum + benefits : Ashdown Group: A truly exciting opportu...