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It's payback time: despite recession, mortgage repayments in the uk are at an all-time high
The first three months of this year raised questions of whether there were any green shoots in the gloomy economy when it came to mortgage repayments. Despite the credit crunch and statistics for home repossession alarmingly high, £8.1 billion was paid off mortgages across the UK in 2009 up to the end of March.
This statistic is understood to be the highest since records began to be maintained in 1970. It is hoped that the trend will continue into the second quarter and beyond, so the property market can obtain a little bit of much-needed stability.
Because of the depreciation of house prices over the past couple of years, the option of equity release is not as an attractive option as it would have been pre-recession. Plus, it can actually be completely impractical for some homeowners who are enduring the unusual financial experience of negative equity.
IHS Global Insight’s chief economist in the UK and Europe is Howard Archer, who explained another reason why more money is being invested into housing than ever before: "In addition, ever lower savings rates have made it increasingly more attractive for many people to use any spare funds that they have to reduce their bad credit mortgages."
It seems low rates is the principle reason for this splurge in mortgage repayment. Interest rates, currently at a minuscule 0.5%, means that it is the perfect opportunity to invest in home loans and to make the most out of money in what is otherwise very tough times for the consumer.
This could be a reason why the CML reduced their predictions for the amount of homes that would be repossessed this year, as well as the amount of people who are likely to have arrears. It could be said that borrowers are beginning to see housing as more of an investment rather than a cash machine.
Remortgaging hasn’t been too good an option for some over recent months because of the depreciation in house prices. Resultantly, this has meant a loss of equity in the house. It is hoped that paying off as much of a mortgage of possible can give a better chance of remortgaging becoming an option in the future.
Ashley Brown directs an independent mortgage broker and said: “Homeowners now recognise that this is the time to batten down the hatches and reduce their debt rather than live on credit."