ERC: Record £17.6bn of mortgage debt repaid in Q4 2020

Jake Carter

March 12, 2021

UK households repaid a record £17.6bn of mortgage debt Q4 2020, the equivalent to £192m per day, according to the Equity Release Council (ERC).

However, findings from Bank of England figures show that, while over-payments have increased, regular loan repayments remained below pre-pandemic levels.

This is accountable to some mortgage holders continuing to defer payments in the face of financial pressures.

The nation’s total mortgage debt also rose to a new high of almost £1.5tn by the end of 2020.

This figure has increased by £44bn in the last year, and is three times higher than the £494bn of mortgage debt accrued in 2000.

UK mortgage holders made £5.1bn of lump sum repayments in Q4 2020.

This was an 18% annual rise from Q4 2019 and a 22% quarterly rise from Q3 2020 to surpass the previous high of £4.9bn (Q3 2007) by £133m.

The ERC believes this can be attributed to retail savings deposits increasing by £127bn between March and December.

The council also looked towards a separate Bank of England survey in November 2020, which highlighted that 28% of households have accrued extra savings during the pandemic, while 20% have depleted their savings.

In Q4 2020, mortgage holders made £12.6bn of regular repayments, which is up from £11.87bn in Q3 and £10.7bn in Q2.

However, regular mortgage repayments remain lower than before the pandemic first hit, with £12.8bn having been repaid in Q4 2019 and £13bn in Q1 2020.

Additionally, the Financial Conduct Authority’s recent Financial Lives survey showed that, across all households, 38% of adults have seen a negative financial impact from COVID-19.

In contrast, the survey outlined that 15% of households reported a positive impact.

Research by the Equity Release Council and Key also highlighted that 34% of homeowners aged 55-plus are worried about running out of money in retirement, up from 27% before the pandemic.

Jim Boyd, chief executive of the ERC, said: “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.

“At the same time, COVID-19 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.

“Access to flexible finance is just as important to manage the journey through retirement as working life.

“Growing demand and changing needs have brought about a revolution in later life lending which has transformed the options for older borrowers.

“It is crucial that consumers can rely on clear safeguards and expert advice that considers all implications and alternatives.”

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