A record £8.14 billion was paid of mortgage debts in the first quarter of the year, according to the Bank of England.
This compares with £7.76 billion in the final quarter of last year as the recession led to the fourth quarter in a row of "negative equity withdrawals".
This rush to repay debt contrasts with the £6.73 billion of equity released at the beginning of last year as homeowners raised cash for major purchases.
Retailers are now being hard hit by the public`s belated realisation that the boom years are over and that severe belt-tightening is the new order of the day.
Consumers have also learned that while increasing the size of mortgage debts may seem fine when house prices are booming, it is not a good idea when prices are falling and unemployment rising.
The Bank reports that equity withdrawals accounted for 2.9% of post-tax income during the first quarter of 2008, but during the first quarter of this year people spent the equivalent of 3.5% of their pay paying down their mortgages.
This turnaround is likely to have contributed to the fall in consumer spending seen during the first three months of the year, with figures from the Office for National Statistics released earlier this week showing the biggest drop in household spending since 1980 in the first quarter.
The latest figures are a far cry from the record £17.09 billion of equity that was unlocked during the final quarter of 2003.
Equity withdrawal enables homeowners to cash in on rising house prices by increasing their mortgages to convert some of the rise in the value of their home into cash.
The money is typically used to fund big purchases such as cars or home improvements, or for debt consolidation.
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