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Early mortgage repayment sets trend for middle class

Lee Robertson, chief executive of Investment Quorum, a Gold Standard wealth manager said the reasons behind the change in mentality were quite strategic and well timed and could stand these borrowers in good stead for future credit at exceptional rates.

He said: "People are paying huge chunks off their mortgages and benefiting from the slump, in some cases with mortgage payments being reduced from £1000 a month to 1p for a range of reasons."

The reasons behind these extra repayments are as follows:

1 Many preferential rates are due for review later this year – and to qualify for the better deals a lower loan-to-value will be required – reducing capital now will put these borrowers in good stead when it comes to renegotiating their mortgage deal;

2 Job stability, with the employment market showing continued signs of instability, attempts are being made to reduce mortgage debt to more manageable levels in the event that lower incomes and single incomes become the norm;

3 With investment rates so low, it makes sense to use the cash to reduce debt and increase cash flow;

4 In the event that a client needs to downsize, the more the debt is reduced the greater flexibility to downsize thereby reducing the fear of negative equity;

5 People have decided they no longer want to be "keeping up with the neighbours", there are only so many ways in which you can upgrade your non essentials and most people have done that;

6 There is also a noticeable change in mind-set that people no longer wish to use credit (because it has become harder to obtain) and are more willing to use savings;

The strategies were unveiled as economic data from The Bank of England revealed that just over £8billion of mortgage debt was repaid by borrowers in the final quarter of 2008, compared to £5.9billion in the third quarter of 2008 and just £1.8billion in the three months before that.

Robertson said: "These borrowers are setting themselves up for comfortable futures and the ability to gain credit in the future."

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