Homeowners rush to pay back mortgages

Homeowners injected more money into the housing market in the third quarter of this year than ever before as Britons focused on repaying their mortgages rather than adding to their debts.

Figures released today by the Bank of England showed that UK households ploughed £5.7 billion of equity back into their homes between July and September, the highest sum since records began in 1970.

It is the second successive quarter in which homeowners have pumped money back into their homes, after they paid off £2 billion in the second three months of the year.

During the property boom, billions of pounds was extracted as rising prices encouraged homeowners to cash in on the value of their properties to fund big purchases. In the third quarter of last year, for example, housing equity withdrawal totalled £11.1 billion.

But with property prices sinking, Britons have begun to play it safe and are using spare cash to cut their debts.

"In this market, it pays to travel light," said Andrew Montlake, partner at independent mortgage broker Cobalt Capita. "People are scared stiff of recession and rising unemployment and are now paying off their debts rather than adding to them."

House prices in the UK have fallen by almost 15% this year. Analysts forecast another double-digit decline in 2009.