Mortgage pay-offs hit £7 BILLION high ~ Debt Managements and Consolidation

Record amounts of money are being spent to repay mortgages and pay off other debts secured on their homes, according to the Bank of England.

Households managed to pay off £7 billion net of mortgage and other secured debt in the last three months of 2010, which is the highest net repayment ever seen in this country since records began in 1970. This will deal a crushing blow to the country’s economy, with new lending to first-time buyers on a massive low, little can be done to balance the depressing impact on the economy.The Bank's latest statistics on housing equity withdrawal show a steady ascent on the £6.6 billion paid off between July and September.The figures also include money paid as deposits by homebuyers.Lenders demanding higher deposits and rationing home loans would also increase the financial stake that homeowners have in their properties.During the boom, people used extra mortgage borrowing to cover other spending.Kevin Still, Director of Atlantic Financial Management, said: “For those UK consumers with surplus cash at month end, clearing debts appears to be sensible with the average level of unsecured debt for people using credit continuing to fall through the recession. This has dropped from £21,640 in April 2009 to £16,207 in April 2011, according to Credit Action. From July 1998 to March 2008 homeowners borrowed an extra £328 billion against the rising value of their homes.Kevin continued: “What is of concern is those homeowners reliant on low interest rates and who are facing an increasing squeeze on their disposable income with the budget compounding this to create more debt problems. Leading debt analyst TDX has recently forecast a rise in informal debt solutions like Debt Management Plans (DMPs) in the second half of 2011.” As a percentage of incomes, the net pay-off of debt in the three months of 2010 was also at a near record 2.7 per cent, a shade behind the 2.8 per cent of income paid off in the last months of 2008, in the midst of the credit crunch.The Bank commented that "weakness in housing equity withdrawal continues to be driven by the relative weakness of lending compared with resilience in housing investment".According to the Independent, the British Chambers of Commerce (BCC) says that the "overall picture is worrying", with the soaring cost of raw materials squeezing profit margins and confidence. The BCC says that the conclusion of its poll of 6,000 firms shows an outlook "mediocre and disappointing, particularly for manufacturing". It predicts that the economic upturn in the first quarter of this year will just about compensate for the fall in output at the end of last year. Bad weather and the VAT increase have been blamed for the lack of business cash flow.David Frost, the director-general of the BCC, said: "While the Government has listened to calls to help the private sector create growth, there is more to be done in giving businesses greater confidence, and encouraging them to export, invest and create more jobs. As the public sector cuts start to bite, the Government must get the detail right on the measures announced in the Budget to generate economic growth."
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