Mortgage holders pay off £8.1bn in mortgages

With the dramatic fall in house prices leaving many homeowners with zero or even negative equity, new figures from the Bank of England have estimated that British homeowners paid a record collective sum into their homes in the first quarter of 2009.

The Housing Equity Withdrawal (HEW) is estimated to be at minus £8.1 billion for the first quarter of 2009.

In a statement, the Bank of England said:

“The negative figure implies that individuals injected a net total of £8.1 billion into housing equity in the first quarter.”

That figure compares with an estimate of a net injection into housing equity of £7.8 billion in the last three months of 2008.

Speaking to the Times newspaper, Ashley Brown, director of Moneysprite, the independent mortgage broker, said:

“The hedonistic days of living the good life and borrowing against the value of your property are a distant memory. Homeowners now recognise that this is the time to batten down the hatches and reduce their debt rather than live on credit.”

Howard Archer, chief UK and European economist of IHS Global Insight, added:

“Sharply falling house prices have made housing equity withdrawal increasingly unattractive, while very tight credit conditions have made it more difficult to carry out the process as well as to take out new mortgages.”

“In addition, ever lower savings rates have made it increasingly more attractive for many people to use any spare funds that they have to reduce their mortgages. “