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£8bn Mortgage debt paid off by borrowers in 2012 third quarter

03/01/2024

Recent figures from the Bank of England have confirmed that more money was paid off the collective mortgage debt in the UK, outstripping mortgage borrowing for the eighteenth quarter in a row, although at just over £8 billion this repayment did not atch the £9.4 billion in the second quarter of 2012. This is a significant change from the behaviour of mortgage borrowers in the years 1998-2008, when significant amounts of equity was released, through remortgaging and secured loans. As an example, over fifteen billion pounds was withdrawn in the final three months of 2003.

The Bank of England’s view is not that these figures represent an increase in repayments on secured debts, but a general lowering of sales and remortgage activity in general. Because the criteria have changed enabling remortgaging and because the tandard rates are low even for those who have come to an end of a special introductory rate, remortgaging levels are likely to remain at this lower level for some time. Despite signs of life in the housing market, switching levels are still low, with remortgage numbers down by nearly 14% on the same period in 2011.

Housing expert Henry Pryor is of the opinion that these figures simply highlight the changes in shopping habits across the board since the millennium. He said, ‘Since the credit crunch consumers have been encouraged to become more prudent and whilst the government continues to print money it doesn’t have to stimulate the economy it appears that the fiscal fright that many people had after the collapse of Northern Rock and the austerity measures that the coalition government have introduced has convinced people that we need to be saving rather than spending.’ Since the credit crunch people are no longer using equity in their houses to fund major purchases such as cars and white goods, which is having a serious effect on consumer spending, which in turn is keeping the country in its economic downturn.

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