Brits repay £122b more on homes than borrowed since 2008

Housing equity withdrawal (HEW) was negative again in the first three months of 2012, according to latest Bank of England data.

This means that fewer people are borrowing against the value of their homes to get money for new cars, holidays and other major purchases, a practice which became increasingly popular during the pre-crisis property boom years, when house prices kept on rising.

Since the summer of 2008, as the credit crunch was beginning there has been a cumulative amont of £122 billion paid down on property. This includes a reduction in overall mortgage debt of £8.8 billion in the final quarter of 2012.

However, the Bank of England concluded that there was "little sign" that the trend in repaying debt was increasing, more that a reduction in housing activity and lack of remortgaging is affecting the figures.

Tighter lending criteria means that it is more difficult for people to borrow extra money when they are re-mortgaging and a slight fall in house prices means that equity in many properties is not increasing at the rate it was between 1997 and 2007.

The latest figures reveal that an average of 3.3 per cent of overall net income is being used to reduce mortgage debt.

The Bank said the amount of HEW in the first quarter of this year was -£8.8 billion, £0.3 billion lower than the figure for the previous quarter.

Howard Archer, chief economist at IHS Global Insight, said the fact that HEW is no longer happening is a constraint to consumer spending.

“This is on top of recent extended elevated inflation, muted wage growth, the fiscal squeeze, high unemployment and elevated debt levels,” he said.

Dr Archer added that the drop in HEW suggests people are making an effort to pay down their debt amid concerns over the economy and jobs outlook.

“Extremely low savings interest rates have undeniably made it much more attractive for many people to use any spare funds that they have to reduce their mortgages,” he said.

“In particular, many people may be using the extra money that is resulting from their very low mortgage interest payments to reduce the balance that they still owe on their houses.”

Steve Wilkie, director of Responsible Equity Release, said: “These latest figures reconfirm that the nation’s properties are no longer the nation’s ATM.

“The gradual but consistent decline in equity withdrawal from the UK’s property stock mirrors the gradual but consistent decline of the UK property market.

“While mature households still have significant equity, and are able to draw on it, many younger households cannot as there is simply not enough of it there.”

He added: “The days of long-haul holidays, new cars and extravagant lifestyles are, for many people, long gone.”

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