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Unlike ten years ago when equity was generally used to build conservatories and extensions, homeowners are now using the equity to pay off their mortgages faster. The Bank of England released figures for the first quarter of this year showing a massive cut in household debt of £13bn.

With mortgage interest rates at record low levels, UK families are benefiting from a huge boost in the amount of equity in their homes.

House prices have risen steadily over the last few years. The first quarter of this year was the 28th in succession to see a net injection of equity into UK homes, taking the total to £313bn since 2008. A Hometrack survey covering the first half of 2015 showed house prices rising by an average of 6.3% across 20 UK cities.

At the same time, interest rates have remained very low, which makes it more attractive to plough any spare cash into paying off debt rather than putting it into a savings account.

It’s a far cry from 2006, when consumer spending was boosted by homeowners taking equity out of the family property, on easy-terms equity withdrawal schemes from pre-credit-crunch lenders - today’s banks.

Economists have been surprised to see the rate of ‘net housing equity injection’ (basically, paying off debt so that there’s more equity in your home) continue to rise to the £13bn figure even while the economy continues to improve.

However, the Bank of England says we haven’t yet turned into a nation of savers – the overall savings ratio (which covers all of us, not just those with homes increasing in value) is still showing a worrying decline.

Resources:

http://www.theguardian.com/money/2015/jul/06/uk-households-paying-off-mortgages-debt-repayment-bank-of-england
http://www.theweek.co.uk/house-prices/61987/houses-prices-2015-surprise-drop-in-top-london-boroughs


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