Record level of mortgage debt repaid

house with pound signs

Home owners paid back £9.15 billion more than they took out from their mortgages in the three months to June, according to figures from the Bank of England. It's the most that has been repaid in a three-month period since at least 1970, when the Bank of England started collecting data.

Prior to the financial crisis in 2008, the trend was for homeowners to regularly remortgage their homes in order to capitalise on rising house prices. The money would then be used to fund holidays, new cars, school fees or other big purchases.

So the switch to a focus on paying off mortgage debt is bad news for the economy – since June 2008 £92.9 billion has been paid off mortgages, that's money that otherwise would have flowed back into the high street and other UK businesses.

Sensible move

But the change to repaying mortgages is a sensible move says experts.

"The record net injection of housing equity in the second quarter points to a strong desire and perceived need of many people to improve their personal finance balance sheets given high debt levels and serious concerns over the economic situation and jobs," says Howard Archer, chief economist at IHS Global Insight.

"Furthermore, extremely low savings interest rates have made it much more attractive for many people to use any spare funds that they have to reduce their mortgages. In particular, many people may be using the extra money that is resulting from their very low mortgage interest payments to reduce the balance that they still owe on their houses."