Brits Prefer to Pay off Mortgage Debt than to Borrow Extra

According to the latest figures published by the Bank of England on Friday morning, October 2nd, UK residents have paid back more mortgage debt than they borrowed against the value of their property.
In the second quarter of 2009 – that is, between the months of April and June, an average of £7 billion was injected into UK property equity, claims the Bank of England. The figure is particularly impressive since withdrawal of housing equity, or borrowing against the value of property, in the same period stood at -£7 billion. The figures compare to £7.3 billion of net injections into property equity in the 1st quarter of 2009.
The report of the Bank of England also highlighted the fact that the 2nd quarter of 2009 was the 5th quarter in a row, when UK borrowers paid down more mortgage debt than they borrowed against the value of their houses.
The information provided by IHS Global Insight suggests that net total of injections into housing equity made by UK residents since the 2nd quarter of 2008 stands at £28.9 billion.
Commenting on the figures, consultancy’s member, one of the leading UK economists, Mr. Howard Archer, said that the decreased level of borrowing against house value might well be explained by significantly reduced house prices, which make housing equity withdrawal unwise, as well as by strict lending conditions, which make the borrowing process complicated. Moreover, he is determined that many UK borrowers chose to use their spare funds to pay off mortgage debt rather than to put them on savings accounts that have become extremely unattractive lately.
Another Mr. Howard Archer’s observation suggests that many pensioners, whose children have moved out, chose to purchase smaller houses and to use the remaining cash to boost their pensions. Also, he said, the overall trend in the UK is improving balance sheets, which emerged in the result of drastic debt levels.