Homeowners paid off their mortgages to the tune of £8 billion in the final months of last year, following a growing trend that began last spring, and an all-time record since the Bank of England started tracking these numbers in 1974.

This brought the total of cash invested in private homes by their owners since this time last year to £15.7 billion, according to numbers for “housing equity withdrawal” published by the Bank yesterday.

Previously, ever since 1998, home-buyers had regularly been using the rising value of their properties to take out mortgages for purposes unconnected with the housing market – and still did for a total of £6.6 billion in the first three months of last year.

This process then went sharply into reverse with a £1.8 billion reinvestment in private homes in the second quarter followed by one of £5.9 billion in the third.

Bank of England economists think this was largely the result of the fall in mortgage lending. Existing home-buyers are paying off the large stock of existing mortgages in the ordinary way, while new lending by banks and building societies has dried up.

Some of the money could also have come from other investments that low interest rates made unattractive. But the sums are still large enough to have had an impact on consumer spending – just as they had boosted it in the years of equity withdrawal.

The Bank said repayments in the fourth quarter of last year amounted to 3.3 per cent of Britain’s total after-tax income, while withdrawals in the first quarter added 2.9 per cent to Britons’ spending power.

Howard Archer at IHS Global Insight pointed out that some equity withdrawal in past years was used to pay off other debts, invest in the stock market, or to top up pensions.

“A significant proportion of housing equity withdrawal was due to older people whose children had left home trading down and using the proceeds to supplement their pensions,” he pointed out.

“Sharply falling house prices have made this less attractive to do, which will significantly hit pensioners’ wealth.”

Andrew Montlake, director of mortgage broker Coreco, said: “People’s number one priority in these uncertain times is to put money into their homes, not to take it out.

“With the strict criteria and low loan to values being enforced by lenders, and falling house prices eroding equity, many borrowers are simply no longer able to raise money against their property.

“The few that can are heavily outweighed by the number of people consciously overpaying, as well as those simply making normal monthly payments on their repayment mortgages.”

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said the figures showed just how damaging the collapse of the housing market had been for the wider economy.

“The constraint on household borrowing from the loss in value of residential property contributed in no small way to the one per cent decline in consumer spending in the fourth quarter,” he said.

“The likelihood is that despite tentative signs of a stabilising in activity in the residential market, homeowners will find it difficult to resume extracting equity from property for the foreseeable future given the weak pricing environment.”