The government’s decision to temporarily reduce VAT and cut interest rates had been done in the hope of increasing consumer spending in an effort to boost the economy. However, as predicted by Worldwide's managing director Peter McGahan in his article “http://www.wwfp.net/weekly-articles/investment/30-january-09.htm" target="_blank"> The credit crunch - What on earth is that then? ”, with interest rates on mortgages lower than ever for many homeowners, the extra disposable income is being used to reduce their mortgages rather than for funding spending.

The final 3 months of 2008 saw homeowners reduce their mortgages by a staggering £8bn, the biggest injection of cash since 1970 according to the Bank of England.

The rising fear of unemployment, low savings rates and falling house prices eroding peoples equity, has led many to concentrate on debt reduction rather than spending. This is major change in attitudes from the days of homes being used as cash machines to fund excessive spending and holidays, with the peak of equity withdrawals being in the last quarter of 2003 when a massive £17bn was added to people's mortgages.