Housing equity withdrawal falls by £0.4bn says Bank of England | AboutProperty.co.uk

The Bank of England has reported that housing equity withdrawal fell from -£6.6 billion to -£7 billion in the last quarter of 2010.

This means that British property owners injected a net total of £7 billion into housing equity in the last three months of the year.

The Bank put this down to the fact that lending is relatively weak compared to housing investment, which has proved resilient.

Nicholas Leeming, business development director at Zoopla.co.uk, said: "While savers have been hammered by low interest rates over the last two years, borrowers have been sat on the other side of the fence enjoying very cheap debt. This has given SVR holders the opportunity to pay off large chunks of their mortgage and thousands have made hay while the sun has shone.

"With a potential interest rate rise round the corner and uncertainty over the future of the economy, many people have accelerated their plan to pay off as much as possible before their monthly payments go up and this will continue every month that rates are held at 0.5 per cent.

"Despite the record levels of repayment, lenders are showing little sign of increasing their lending activity. Another year of stagnation will do nothing to benefit the wider economy. With so much money being paid back by borrowers, it’s high time lenders injected this cash back into the property market to get the sector moving again."

Richard Sexton, business development director of e.surv chartered surveyors, said: “Borrowers realise that with base rates still at a record low, the best use of their disposable income is to pay off debt. They certainly aren’t keen to spend. Savings rates are so abysmally low that there is simply no incentive for people to tuck money away for a rainy day – it would lose value with inflation so high.

"People have seen the anticipated interest rate hikes on the horizon and have upped the ante of their repayments to take advantage of the lull before the storm.”

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via aboutproperty.co.uk