According to recently released figures homeowners in the UK have reduced their overall mortgage debt by an impressive £8 billion, even though the financial crisis continues and the country is plunged into recession.

Industry officials say that the dramatic cuts in interest rates has resulted in homeowners pumping more money into repayment on their tracker mortgages, and many have kept repayments as they were even though interest rates have fallen, resulting in them clearing far more of their mortgage debt far more quickly.

It is also though that many people have decided that rather than pay their money into savings accounts, where at present it is earning little to no interest, they will put it towards repaying both secured and unsecured debt, where interest charges are still high. As a result of this there has been a significant impact on the repayment of both mortgages and unsecured debts such as loans, credit cards, and overdrafts.

One industry official said that the majority of people that were paying off their mortgages more quickly were those with tracker deals, who have been the main beneficiaries of the interest rate cuts, which have seen the base rate fall from 5 percent in October to just 0.5 percent by this March. She added that some of these homeowners had seen their mortgage repayments fall by up to 80 percent.

She stated: “In our view this is one important channel in which interest rates are working. Roughly 40% of the mortgages taken out in 2007 were trackers and so will have benefited fully from the decline in Bank Rate over the past 18 months. Because of falling house prices this money is being used to pay down debt rather than spent on goods and services.”

Leave a comment