Mortgage Trends Show Higher Home Loan Investment

By editor
In Accounting And Banking
Jul 29th, 2015
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Complex international economies send mixed signals, especially during the recent years of recovery. Will growth be sustained? Is inflation a threat? Does the debt ratio appear sustainable? Is consumer confidence on the rise? Answering these and other important questions gives analysts the tools required to construct forecasts and prognosticate future economic outcomes. So while no single variable is capable of painting a comprehensive picture of economic health, benchmark metrics are used to identify trends.

Mortgages are an integral piece of the global economy, representing massive savings accounts for investors at every level of affluence. As a result, the housing market has a heavy influence on overall economic performance. With so much vested in the success of this economic sector, mortgage trends are watched closely for clues to be extrapolated to other financial markets. Recent conditions within the industry have brought even greater attention to mortgage dealings from regulators, advisors and economists, responding to the sector’s collapse, which touched every aspect of international finance.

Although it is a single aspect of a larger financial scheme, there is a positive trend shaping mortgage repayment among Britons.

Home Owners Continue to Invest

In contrast to the pre-crash conditions that left many mortgages underwater, recent data suggests home owners are returning to a more sustainable paradigm, investing more of their money in their homes. In fact, by some measures, mortgage holders are paying down loans and stowing away cash in their homes at a record pace.

Mortgage Trends

Net housing equity injection provides a standard by which to measure the total investment into home mortgages. The measure furnishes points of comparison that can be used to track trends and derive data about net increases in the amount of money mortgage holders contribute to their home loans. During the first quarter of 2015, the injection rate grew to record levels, totaling £13 billion for the period. The increase represents a £400 million gain over the prior three months, and adds to a string of twenty-eight successive quarters with positive movement in the net housing equity injection category.

The trend can be explained by a combination of factors. For starters, investor/owners are aware of recent circumstances, which left many families in a difficult position. As a result, they are taking greater pains to protect themselves from drastic downturns, by accumulating savings in their homes. And as the economy improves and individual earnings rise, investors lack profitable options, so conservative holdings are the best alternative. Money once earmarked for savings accounts now finds its way to mortgage overpayments, to ease and accelerate repayment.

Credit availability is another major influence on consumer behavior, so the current climate of low interest rates favors increased investment in homes. As they refinance under new, more favorable terms, families have more money available to overpay toward their mortgage principle balances, so cash injection rates rise. To track historically low rates, cost conscious consumer use sites like Readies for loan comparisons and to evaluate loan rates and borrowing opportunities from multiple lenders.

Personal Savings Still Lagging

Encouraging signs from mortgage holders represent one aspect of growing financial health. Unfortunately, other areas don’t necessarily reflect the same progress. Personal savings, for example, is low among Britons, with many earners reporting no savings to speak of. In a counterpoint to growing mortgage investment, it is predicted UK savers will continue to suffer lost savings potential in years to come.

In fact, UK savers are not currently keeping pace with the amount of money set aside before the major crash, essential making the citizenry poorer than before the downturn – despite recent economic growth. Some of the positive economic signs – perhaps even the mortgage pay down example, may indeed be due to consumers raiding their savings to fund their lifestyles.

Though it doesn’t answer to the economy’s future, home owners’ increased investment in their homes adds security to their mortgages, so should be seen as a positive step. Whether due to low interest rates and increased access to borrowing or to the lack of investment alternatives, reducing personal mortgage debt is a trending practice.