Homeowners downsize mortgage debts
The increasing number of homeowners taking advantage of the current low interest rates to reduce their mortgage commitments is set to have a positive knock-on effect on the housing market, according to a Staffordshire estate agency.
Heywoods Property of Newcastle-under-Lyme has welcomed official figures from the Bank of England, which reveal that borrowers have paid on average an extra £3,000 off their mortgage in the two years since the recession began.
Traditionally, homeowners have had a tendency to increase their mortgage debt, by releasing equity to fund big-ticket purchases such as a car, holiday or home improvements, rather than reduce to it by overpaying on their mortgage.
However, since the summer of 2008 that trend has reversed, with UK homeowners paying off a total of more than £36 billion on top of their regular mortgage repayments.
Heywoods said that rather than stimulating consumer spending, lower interest rates had instead encouraged many homeowners to take the opportunity to cut down on their household debts.
And the good news for the housing market, it added, was that homeowners usually only considered a move once they were able to comfortably afford their existing mortgage.
So with many borrowers taking measures to reduce their monthly mortgage commitments, it concluded, they would be better positioned to afford an upwards move further down the line.