Recent falls in house prices and the economic downturn have put people off taking money out of their property, leading to equity withdrawal being negative for the fifth quarter in a row

The rate at which people are repaying their mortgages is broadly similar to the first quarter of the year, when home owners made net mortgage repayments of £7.3bn, according to the Bank of England.

Home owners’ focus on paying down their mortgages is in stark contrast to previous years, when people released equity from their properties to fund large purchases.

While people’s focus on paying off their debts may be more prudent than tapping into their housing wealth to supplement their spending, it is bad news for beleaguered retailers.

The figures show that households spent the equivalent of 2.9pc of their post-tax income on reducing their mortgages. The latest figures are a far cry from the record £17.09bn of equity that was unlocked during the final quarter of 2003.

Equity withdrawal enables home owners 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.

But while people feel confident about increasing the size of their mortgage debt when house prices are booming, they are far less inclined to do so when they are falling and unemployment is rising.

House price falls of more than 20pc since the market peaked in July 2007 also mean many people no longer have sufficient equity left in their property for them to withdraw, even though house prices rose for the fifth month in a row in September, according to new figures from Nationwide Building Society.

The credit crunch has also led to banks and building societies tightening their lending criteria, making it more difficult and expensive for people to extend their mortgage, particularly if they have only a small equity stake left in their home.