Families put big spending on hold to pay off their mortgages as debt falls by 8bn in three months
Homeowners paid off more than they borrowed in the third quarter of 2012It was the 18th quarter in a row that mortgage debt has fallen

. It was the 18th quarter in a row that mortgage debt has fallen, and families have now ploughed 137.5billion of equity into their homes since early 2008.

The injection of equity – which increases the proportion that households own against the proportion that is mortgaged – is in stark contrast to the borrowing binge of the decade before the financial crisis struck.

Families have been cutting spending to prioritise mortgage repayment

Families have been cutting spending to prioritise mortgage repayment

Families unlocked billions of pounds from their homes, often in the form of remortgaging and other loans tied to their property, between 1997 and 2008 to fund large purchases such as cars, holidays or home improvements.

But with house prices subdued and borrowers nervous about their jobs, repayments are now outstripping new loans.

Families have been putting big purchases off

Families have been putting big purchases off

Howard Archer, chief UK economist at IHS Global Insight, said the paying off of mortgages ‘suggests there is an ongoing strong desire of many people to improve their personal financial balance sheets’.

It has long been thought that the shift was the result of homeowners taking advantage of ultra-low interest rates to pay off their mortgages.

But the Bank of England report put it down to the low level of house sales since the start of the financial crisis, as nervous would-be buyers hold off and first-time buyers struggle to get loans to get on the housing ladder.

Mr Archer said the new trend was seriously holding back consumer spending and therefore the economic recovery. ‘In past years, housing equity withdrawal has been used significantly to support consumer spending,’ he said.

Dominic Hennessy, managing director of home loan broker Just Us Mortgages, added: ‘The days of regular house moves and remortgaging are well and truly over. People are stockpiling cash and reducing debt, not adding to it.’


Confidence that house prices will increase over the next year has gone up to its strongest level in at least 18 months, research suggested today.

Nearly four in 10 (38%) of people predict that house prices will rise over 2013, while less than a fifth (18%) forecast declines, Halifax said.

The overall price outlook balance, which is worked out by subtracting the share of people who expect price falls from those who predict rises, stands at 20, which is the highest reading since the survey began in April 2011.

Despite the overall increase in confidence that house prices will rise next year, Halifax found evidence that the market will remain fairly sluggish.

Some 53% of those surveyed said that 2013 will be a good time to buy – around four times the 13% who said it will be a good time to sell.

Only 9% thought it would be a good time to both buy and sell in the coming months, suggesting that activity will still be subdued, Halifax said.

Halifax recently said that it expects house prices to remain flat over the next year, while some other surveys have predicted small increases or decreases.

The South East was the region where people were most likely to predict price rises, closely followed by Yorkshire and the Humber, Halifax found.
People living in Wales and the East were the least likely to say that prices are set to increase.

London, where the market has remained relatively strong due to interest from overseas buyers, also had a below-average share of people predicting house price rises this year.

Some studies have recently suggested that the London market could cool off slightly next year, although it is still expected to be one of the strongest regions for house price growth.

Martin Ellis, housing economist at Halifax, said the “remarkable stability” of the housing market despite the difficult economy is likely to have been key in lifting people's house price expectations for 2013.

But he added: 'Ongoing concerns over job security and the challenges in raising a deposit are likely to constrain housing demand and activity next year.

'Accordingly, we expect continuing broad stability in house prices nationally in 2013.'

The number of mortgages on the market has increased by around a fifth since a multi-billion pound Government scheme was launched in August to boost lending to households and firms.

But some 58% of people surveyed said concerns about job security were a barrier to buying a home and 55% said that raising a deposit was still a big hurdle.

The proportion of people concerned about job security has jumped by seven percentage points since a similar study was carried out in October.

Around 1,900 people took part in the study across Britain.