Friday, Nov 30, 2007
Household debt now exceeds 150% of disposable income (a historical high)
Economist: Bleak House: The worst is yet to come for Britain's housing market
UK house prices have become unaffordable to an increasing number of the population, given that household debt now exceeds 150% of disposable income (a historical high), and that the mortgage interest burden stands at 20% of gross income (up from 11% in 2003). Even if demand were strong enough to continue to push up house prices, the recent credit crunch has reduced the funds available to potential house buyers as lenders have reined in borrowing.
Posted by drewster @ 12:02 AM (370 views) Add Comment
2 Comments
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1. talking rot said...
This is a good post - thanks Drewster.
I particularly like "[The CML reports] ... 1.4m people will reach the end of cheap fixed-rate loans over the next 12 months, and will then have to make higher monthly repayments" and "lenders had withdrawn 40% of buy-to-let and residential mortgage products over the past three months. In the case of “bad credit” mortgages, there was a 72% drop after rapid growth prior to the problems in the sub-prime mortgage market. According to Moneyfacts, even people with good credit ratings have suffered a 16% decline in the number of mortgage products available."
There is likely to be a knock-off effect to consumer spending as people feel less wealthy and they see repossessions rise. In addition, governmental spending will decline. The outlook for the economy is not good.
So, good news all round then!
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