UK Cuts Down Debt to Save
Britons reined in their mortgage debt by £4.9 billion during the third quarter of 2009, figures released by the Bank of England on the 29th of December showed. The amount that people released from their homes was negative for the sixth consecutive quarter, as house price falls and the recession made homeowners to focus on repaying their debts. Despite this, the rate of paying down mortgages slowed for the third consecutive quarter. During the first six months of the year, householders reduced mortgage debt by near to £7 billion each quarter. If you're looking to reduce your mortgage, you may want to make use of a mortgage calculator such as the one provided by Alliance and Leicester.
Smaller down paying has followed a decade when homeowners could regularly withdraw equity from their homes, as this was a cheap way to fund purchases or consolidate other debts. In the first quarter of 2007, just before house prices reached their peak (a 180% average growth in ten years) householders withdrew £13.8 billion from their properties, which is equal to just over 6% of average post tax household income. Meanwhile, the repayments in the third quarter of 2009 were worth just 2% of post tax income.
The cut in debt is most likely to be a result of people hoping to improve their personal balances after the UK recession. Low interest rates on savings, along with smaller rates on tracker mortgage debt, have both made it more attractive for people to use spare funds to reduce their mortgages. After the years when it was easier to withdraw equity from your home things have taken a sharp turnaround, adding to constraints on consumer spending.
The British Banking Association also published figures suggesting people in the UK are turning away from debt, this time on personal loans and credit cards. The value of personal loans has plummeted to £1.1 billion in November – a fall of 43.7% compared with the same month in 2008. The Office of National Statistic published further figures suggesting British households are moving away from borrowing towards saving. Around 8.6p in every £1 was put into a savings account in the three months up to September - the highest amount since 1998.
