In a climate where the media is constantly focusing on a financial downturn and whispers of a 1930’s recession are in the air, it is refreshing to hear positive economical news.

A new study on equity withdrawals has revealed that Britons reduced their mortgage debt during the final quarter of the year, by a record £8 billion.

Equity withdrawal allows a homeowner to cash in on increasing property prices by raising their mortgages to convert some of the hike in the value of their home into money.

This cash frees up the household owner and is typically spent on big purchases ranging from paying off debts to home repairs and improvements.

Credit cardholders get credit

The Bank of England also explained that debt levels via credit cards, overdrafts and personal loans have decreased, because consumers repaid £245 million of unsecured debt in February.

This figure is a sharp contrast from January, where borrowers took out an extra £165 million in credit. The statistic is also the biggest level of net repayment since 1993.

This step in the right credit direction is a sign of the times, when the recession is forcing households to look after their money, when everyone's finances are being stretched to the limit.

Reducing debt is also beneficial for cardholders in the near future, as it can improve credit rating. The information shown on a consumer’s credit report used by lenders reflects an individual’s ‘creditworthiness.’ This may hopefully bump up both customers and lenders confidence levels.

One step forward, 2 steps back

Although the dire credit card and loan debt situation may have improved, the equity sector for property is still in trouble, despite the burst of optimistic figures.

This week’s statistics may be a bright outlook, but they are dim compared to the £17.12 billion of equity during the final quarter of 2003.

Whilst the homeowner’s new found glory may be commended, it has left many retailers gloomy.

Equity withdrawal accounted for 2.9% of people's post-tax income during the first quarter of 2008, the last period for which the figure was hopeful.

With equity withdrawal negative during the fourth quarter, people spent the equivalent of 3.3% of their post-tax pay reducing their mortgage.

Debt globally

In similar news, the Philippines National Government released positive information concerning the nation’s debt level. Overall government debt in the country decreased by 0.4% to PHP 4.221 trillion at the end of December 2008, which dropped from PHP 4.23 trillion.