Borrowers Use Their Savings to Repay Mortgages

Homeowners are using their savings to pay off some of the mortgages. In the last quarter of 2009, borrowers repaid a record amount of £8 billion, the largest amount ever since 1970’s. Falling house prices, uncertain economic situation and reduced employment security have made borrowers to cut down their spending and concentrate on repayment of their commitments. Mortgage brokers believe that although it sounds dull, pinching and saving is just what the doctor ordered at the moment.
Earlier, borrowers relied largely on the cost of their homes. A lot of money has been borrowed from the banks since the peak season in 2003 (£17.1 billion has been borrowed in the time period between October and December 2003). However, this figure fell to £6.6 billion in the first quarter of 2008 as the cost of borrowing has increased and borrowers got concerned with house prices.

The fact that most banks reduced the interest rate on saving accounts almost to 0% also made many borrowers use any cash available to pay off the mortgage.
Latest data from the Bank of England suggests that house prices fell by 2.3% in February, leaving the average house in the UK priced at £160,327 (£35,000 lower than in 2008).
Experts at the Royal Institution of Chartered Surveyors believe that despite all the activity at the property market falling house prices will put obstacles in the way of stabilization of economy.
Brokers say that despite all efforts of the government, the majority of borrowers would prefer to overpay their debt and reduce the amount of cash they owe.