Mortgage debts still falling

Posted on January 7th, 2011 | Categories - News

Mortgages are being paid off and the level of borrowing is falling.

More people are opting to pay off their current mortgages instead of borrowing from banks.

Homeowners are continuing to pay off their mortgage debts instead of borrowing more, according to data revealed by the Bank of England.

The Bank’s quarterly figures show that borrowers have reduced their collective debt by £6.1 billion, marking the 10th consecutive quarter where mortgage holders have put more money into their home than they’ve taken out.

In a separate Halifax report it was shown that the amount of disposable income needed for mortgage repayments stands at 27% – the lowest figure in 12 years. However, it also highlighted that first-time buyers would need an average deposit of £29,000 to make their first foray into home ownership.

Howard Archer, economist at IHS Global Insight, said: “There is an ongoing desire and perceived need of many people to improve their personal balance sheets, given high debt levels and serious concerns and uncertainties over the economic situation”.

He added: “Extremely low savings interest rates have made it much more attractive for many people to use any spare funds that they have to reduce their mortgages”.

During the housing boom, experienced by many homeowners at the start of the last decade, a massive £17.1 billion was borrowed by mortgage holders illustrating the sharp disparity with today’s figures.

Although repayment levels are up, data revealed by the Council of Mortgage Lenders has shown that bank lending to first-time buyers remains weak as financial institutions ration the number of loans they approve.