Repaying debt is in fashion, according to figures released by the Bank of England. The statistics show that Britons repaid more than £4bn in secured lending in Q4 2009.
It’s the seventh quarter in a row that the Bank’s equity withdrawal figure has been negative and should be compared with Q4 2003 when the country withdrew an additional £17bn in secured lending in the face of soaring house prices. The peak of equity repayment was in Q4 2008 when more than £7.1bn of debt was repaid.
It is widely believed that equity withdrawal has been used to support consumer spending in recent years. Conversely, net repayment of housing equity is adding to constraints on spending including high unemployment and stagnant or negative wage increases.
But until the economy improves consumers will continue to adopt a defensive position. They will minimise debt where possible in the face of potential unemployment and rising prices by taking advantage of low interest rates and repaying debt.