Data shows householders are paying off their mortgages quicker than ever

Mortgage debt denialThe Bank of England has released data showing that households in the UK are paying off their mortgages faster than ever before.

According to a number of economists, the current record low interest rates are acting as a spur to homeowners to use their spare disposable income to reduce their mortgage balance.

The data shows that UK households reduced their level of mortgage debt in Q1 this year by £13 billion.

In a complete turnaround from the years pre the financial crash, when it was commonplace for householders to take the equity out of their homes to fund their lifestyle, mortgage holders in 2015 are opting to reduce the level of debt they have in mortgage form.

The latest data has come as a surprise to industry watchers, as they indicate that the pace of repayment has actually quickened, despite evidence that the economy is in recovery.

Levels of consumer spending pre credit crunch were pushed up by householders raising equity via easily affordable plans. Conversely, today, the level of mortgage being paid off is rising steadily, as consumers opt to reduce their levels of debt and improve their financial stability generally.

Economists have commented that the current extremely low interest rates are inspiring many householders to pay down their mortgages instead of saving the money in savings accounts with a poor rate of return.

However, the Bank of England has made it clear that it is too early to assume that households in the UK are now choosing thrift over extravagance, pointing out that the overall savings share continues to drop at a worryingly fast rate.

The Bank has stated many times over the last few years that this drop in equity based withdrawal probably reflects the reduction in the level of house purchases, so is wary about ascribing it to householders consciously deciding to reduce their debt faster.

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