Households not rushing to pay off mortgages despite low base rate

The housing market is widely forecast to remain sluggish next year and the Council of Mortgage Lenders recently predicted that transactions could reach their lowest level since its records began in 1978.

Low savings rates as the Bank maintains its base rate at a historic 0.5 per cent low have increased the attraction for home-owners of using any spare cash to reduce their mortgages.

But the Bank said the trend towards injections of housing equity since the start of the financial crisis has not been linked to an increase in mortgage repayments.

It said: “The fall in housing equity withdrawal since the financial crisis is likely to reflect a fall in the number of housing transactions, with little sign that households in aggregate are making an active effort to pay down debt more quickly than in the past.”

The latest figure was down from a record £9.6bn injection of housing equity recorded in the second quarter of this year.

Analysts said the total injection of equity into houses has reached more than £100bn since the summer of 2008.

Housing equity withdrawal has remained negative in every quarter since spring 2008.

The Government has unveiled a package of measures aimed at injecting life back into the housing market, but lenders and estate agents have warned that the end of the stamp duty holiday for first-time buyers next spring could disrupt the market further.