Figures from the Bank of England show that just over £8bn of the nation’s collective mortgage debt was repaid in the third quarter of 2012.
One of the defining features of the financial crisis has been the difficulty in withdrawing equity from property. It has become much harder as lenders rein back on the maximum loan-to-values they will allow and charge higher rates of interest on smaller equity stakes. With property values falling in many parts of the country, it is proving undesirable to increase the debt against the roof over your head.
The fall in number of people remortgaging is also playing a part as borrowers are not taking the opportunity to increase their mortgage at the same time as taking out a new deal. Low standard variable rates mean many borrowers are content not to remortgage, while tougher criteria from lenders mean many simply are no longer able to do so.
The Bank of England suggests that there is little sign of households paying down their mortgages more quickly than in the past. This indicates that there is a lack of money available to do so, with the high cost of living and rising unemployment paying a part. Where households do have surplus funds there are signs that they are overpaying on the mortgage, particularly as savings accounts are paying such poor rates of interest.
The number of housing transactions is well down on the peak of the market, something we expect to continue into next year as the lack of confidence in the wider economy continues. It will become slightly easier to get a mortgage as the Funding for Lending monies trickle through but many would-be buyers and sellers are more likely to sit tight until circumstances improve.