Record repayments on mortgages in first quarter
Record repayments on mortgages in first quarter
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By James Christie. |  |
Friday, 03, Jul 2009 11:42
The sharp fall in house prices has resulted in record mortgage repayments of £8.1 bilion in the first quarter, it has been announced.
According to Bank of England figures for housing equity withdrawal for the first three months of the year, £8.1 billion was injected into housing equity in a reversal of the recent trend of individuals borrowing against their home.
Simon Rubinsohn, Royal Institute of Chartered Surveyors (Rics) chief economist, said: "This is not a surprise given the fall in house prices over the period and will have contributed in no small way to the weakness in high street spending.
"There have been some tentative signs of a stabilisation in the property market but it is improbable that housing capital, in the near term, will be viewed as a source of wealth that can be drawn down by home owners to supplement their income."
Analysts have noted the consumer boom over the last decade was fuelled by soaring property prices as homeowners used the equity in their homes to increase their spending power.
"However, it should be noted that housing equity withdrawal has also been used for other purposes than supporting consumer spending in the past, such as reducing debts, investing in other financial assets and topping up pensions," Howard Archer, economist for Global Insight added.
Dr Archer added: "For example, a significant proportion of housing equity withdrawal was due to older people whose children had left home trading down and using the proceeds to supplement their pensions. Sharply reduced house prices has also made this less attractive to do, which will significantly hit pensioners' wealth."