Low interest rates and reduced levels of property transactions led to borrowers repaying a record net £9.1billion of mortgage debt during the second quarter of the year, the Bank of England has reported.
A sluggish housing market, low returns on savings and economic uncertainty have put people off taking their cash out of their homes.
It means that housing equity withdrawal being negative in every quarter since the spring of 2008.
The Bank of England confirmed that its latest data showed the highest negative figure since comparable records began in 1970.
Analysts said the record net injection of housing equity reflected peoples desire to improve their personal finances and cut their debt, against a background of high unemployment.
Low savings interest rates, as the Bank maintains its base rate at a historic 0.5 per cent low, have increased the attraction for many people to use any spare cash left over to reduce their mortgages.
The figures were released the day after the Chancellors Autumn Statement, which outlined a package of measures aimed at injecting life back into the housing market, including underwriting mortgages for first-time buyers purchasing new-build homes, to help them on to the housing ladder.
The Government also plans to reinvigorate the right to buy scheme, a policy strongly associated with former prime minister Margaret Thatcher in the 1980s.
But lenders and estate agents said ministers should have gone further by extending the current stamp duty holiday for first-time buyers, warning that withdrawing the concession in the spring will disrupt the already fragile housing market.
While peoples focus on paying down their debt may be more prudent than tapping into their housing wealth to supplement spending, it is more bad news for retailers as households budgets remain under pressure from high living costs.
Equity withdrawal accounted for 3.1% of peoples post-tax income during the second quarter of 2010, but during the second quarter of this year they spent the equivalent of 3.5% of their take-home pay on their mortgage.
