British homeowners have paid off more of their mortgages than ever before as they rush to take advantage of historically low interest rates – which were held at 0.5 per cent today – and with the number of lender’s deals rising day by day, could this be a sign that the mortgage market is at long last starting to pick up again? TheMoveChannel.com finds out…
Figures released today by the Bank of England have revealed that British homeowners have repaid a whopping £8.1 billion off their mortgages in the first three months of this year – which is the highest level since records began 40 year ago.
This rush to repay is partly due to many homeowners finding their monthly repayments have dropped significantly, thus leaving them with some extra cash in which to plough into paying off chunks of their mortgage capital.
The total repaid over the last year is £76 billion.
Simon Rubinsohn, Chief Economist at the Royal Institution of Chartered Surveyors, said, “I’m not surprised by the figures, given the fall in house prices over the period.”
The recession has reversed the borrowing binge of the last few decades and people are now desperate to reduce their debts rather than live on credit.
It was the fourth quarter in a row of net repayments, which signaled very bad news for retailers as consumer spending has dropped right off – people preferring to pay off their mortgage than to have a blow-out shopping spree.
Ashley Brown of mortgage broker Moneysprite said, “The hedonistic days of living the good life and borrowing against the value of your property are a distant memory.
“Homeowners now recognise that this is the time to batten down the hatches and reduce their debt,” he added.
Number of deals on the increase
Financial information service Moneyfacts has revealed a further slight relaxation in lending by banks and building societies in the past month.
At the beginning of July there were 119 mortgage deals available which asked for only a 10 per cent deposit.
Although far fewer than a year ago, this is up from 101 such deals at the start of last month.
“It is encouraging to see that products available with 90 per cent loan-to-values are creeping up,” said Darren Cook of Moneyfacts.
Nationwide Building Society’s decision to allow customers to take out loans worth 125 percent of the value of the homes they are buying shows that lenders are innovating to help borrowers struggling in the UK property market.
The Nationwide deal – which is only available to existing customers in negative equity who want to move house – enables borrowers to take out a loan for 95 per cent of the value of their new house at a fixed rate of 6.73 per cent for three years or 7.48 per cent for five years.
Borrowers would then be able to add on the negative equity from their old home, up to another 30 per cent of the value of the new property, at a higher fixed rate of 7.23 per cent for three years or 7.98 per cent for five years.
For more information on personal finance and mortgages, please visit http://www.themovechannel.com/money/
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Notes to editors:
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