UK households repaid a record £17.6bn of mortgage debt, while one-in-six mortgage payers have been granted payment holidays by lenders, highlighting the polarisation between homeowners brought on the pandemic.
Households paid back the record sum in the final three months of last year — equivalent to £192m a day – “as savings made under lockdown helped some existing borrowers to reduce their debt commitments”, according to trade body the Equity Release Council.
However, 2.75 million households under financial pressure have agreed mortgage holidays, according to a report by banking body UK Finance last month. These deferrals amount to £755 per month of suspended payments on average.
Households that accrued savings, made £5.1bn of lump sum repayments in the final quarter of 2020, says the Equity Release Council.
This was an 18 per cent annual rise from the same period in 2019, and a 22 per cent quarterly rise from the third quarter of last year, surpassing the previous lump sum high of £4.9bn made in the third quarter of 2007.
The Equity Release Council says: “Rising repayments are likely to have been helped by the extra savings accrued by households last year, when retail savings deposits increased by £127bn between March and December.”
Around 28 per cent of households amassed extra cash during the pandemic, while 20 per cent have eaten into their savings, according to a Bank of England survey on the financial impact of the health crisis in November.
The nation’s total mortgage debt lifted to a new high of almost £1.5trn by the end of 2020, according to another report by the Bank. This figure increased by £44bn in the last 12 months and is three times higher than the £494bn of mortgage debt built up in 2000.
Equity Release Council chief executive Jim Boyd says: “These figures suggest mortgage holders across the nation have been polarised by the experience of the pandemic.
“The unexpected gift of extra savings has helped some households to pay down mortgage debt and, by doing so, increase the property wealth they can look to later in life to boost their retirement funds, either by downsizing or releasing equity.”
Boyds adds: “At the same time, Covid relief measures have been vital to help hard-hit families manage the immediate impact of income loss by pausing their repayment obligations. The Spring Budget has extended short-term support via the furlough scheme, and mortgage payment holidays are continuing until the end of July.
“The pandemic will clearly have a much longer-term impact, but the gradual rise in national mortgage debt means borrowing into later life has already become increasingly common.”
