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One In Six Has A Mortgage Four Times Their Salary: Bank Of England Reveals Many Struggling With Payments In Negative Equity

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http://www.dailymail.co.uk/news/article-2526821/One-six-mortgage-four-times-salary-Bank-England-reveals-struggling-payments-negative-equity.html

One in six families have mortgages which are more than four times bigger than their salaries, the Bank of England reveals today.

The report highlights the huge gulf in Britain because half of families have no mortgage or only a small loan of less than twice their salary, but 16 per cent have ‘a debt to income ratio above four.’

If a worker earns the average full-time salary of £27,000, this means his or her mortgage is more than £108,000 or, if a couple earn a total of £50,000, their mortgage is more than £200,000.

Of those struggling with their mortgage, many are also in negative equity, which means the size of their loan is bigger than the value of their property.

The Bank’s quarterly bulletin, published today, reveals one in 25 families are currently in this precarious position, a disaster if they want or urgently need to sell their home.

The number of negative equity victims has risen sharply since 2007, the year that the credit crunch struck, when just one per cent were affected to four per cent of households today.

To add to the pressure on families, their other debts are also rising.

Still what are they meant to do property ownership is the dream and over extending yourself for the dream and of course GDP growth is expected.

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http://www.dailymail.co.uk/news/article-2526821/One-six-mortgage-four-times-salary-Bank-England-reveals-struggling-payments-negative-equity.html

Still what are they meant to do property ownership is the dream and over extending yourself for the dream and of course GDP growth is expected.

Most of the people I knew who bought from 2003ish to 2007ish took out IO mortgages.

IRs going up barely the main issue.

Most are in negative equity cos they have not paid anything back.

Combine with with cuts to tax credits, which will see about 300-400/month cut from their income.

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A corrupt, lying outfit, hell bent on pumping debt to fiddle a few figures warns on debt levels.

When are the press going to call out these scammers for what they are?

Edited by onlyme2

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Most of the people I knew who bought from 2003ish to 2007ish took out IO mortgages.

IRs going up barely the main issue.

Most are in negative equity cos they have not paid anything back.

Combine with with cuts to tax credits, which will see about 300-400/month cut from their income.

Yes, a lot of people who bought from 2004 onwards must have huge mortgages and flat wages.

The longer house prices stay high, the more people will be in this situation. Even with repayment mortgages, low wage/price inflation means that they remain substantial for at least 15 years.

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There's the 'v' word again.

Victims my a***.

[Hand-wringing]They are.

They were only trying to put a roof over their heads[/Hand-wringing]

Edited by 7 Year Itch

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http://www.dailymail.co.uk/news/article-2526821/One-six-mortgage-four-times-salary-Bank-England-reveals-struggling-payments-negative-equity.html

Still what are they meant to do property ownership is the dream and over extending yourself for the dream and of course GDP growth is expected.

Personal responsibility is a wonderful thing.

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The report

The relevant section is: The financial position of British households: evidence from the 2013 NMG Consulting survey.

Households, not families. Newspapers never seem to get the difference.

Some snippets from the BoE report:

The stock of household debt rose substantially in the decade before the financial crisis, but has since flattened off. The debt to income ratio rose from around 100% in the 1990s to a peak of around 160% in 2008 (Chart 1). This can be largely accounted for by the rise in house prices over this period.
However, a rise in interest rates would increase the number of households with high mortgage repayments relative to income — although the scale of the impact will depend on how much incomes pick up.
But the current distribution of LTV ratios remains different to before the financial crisis. In particular, the proportion of households with high LTV mortgages (including those in negative equity) is now higher.
In contrast, unsecured debt holdings increased over the past year, according to the NMG survey. For those with unsecured debt, the average amount outstanding rose from £5,400 in 2012 to £6,300 in 2013.

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The relevant article from the BoE's Q4 2013 Quarterly Bulletin:

The financial position of British households: evidence from the 2013 NMG Consulting survey

Those people are not on the same planet as the rest of us.. one example

Nominal household disposable income has grown by around 3% a year over the past three years (a cumulative rise of about 10%) and there

may be some increase in that rate of growth if the economy continues to recover

Some of their statements give the impression that they're hoping for wage inflation to kick in to sort out the mess (there is no mention of how people would cope if wages dropped, only the impact of varying degrees of wage increases are discussed)

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Those people are not on the same planet as the rest of us.. one example

Some of their statements give the impression that they're hoping for wage inflation to kick in to sort out the mess (there is no mention of how people would cope if wages dropped, only the impact of varying degrees of wage increases are discussed)

That won't wash because we'd see accelerating inflation and yield curves would steepen. I think personally hinges on the boe's spare capacity calcs. We'll see but will have to watch the wage settlements but experience suggests the boe get's behind 'the curve'.

Do interest rates rise before the general election?

Edited by Ash4781

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The report

The relevant section is: The financial position of British households: evidence from the 2013 NMG Consulting survey.

Households, not families. Newspapers never seem to get the difference.

Some snippets from the BoE report:

House price increaes equals increased debt to income ratio. Lol. We are Rich? Oh wait hang on are we? :)

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Osborne is simply pushing public debt back onto the private sector in a vain attempt at re-election.

Would have been preferable to let public debt run up (it has a negative real cost anyway) and allow the private sector to fully deleverage as they've done in the US, before worrying about public spending.

With his HTB schemes on top and by driving back up private sector debt he's really f*cked this one up I'm afraid.

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http://www.dailymail...ive-equity.html

Still what are they meant to do property ownership is the dream and over extending yourself for the dream and of course GDP growth is expected.

"The Bank's quarterly bulletin, published today, reveals one in 25 families are currently in this precarious position, a disaster if they want or urgently need to sell their home."

Seems a very small figure for NE. Is that figure for all mortgagee families or the sum of households?

In any case, a 1% rise and the market is fooked.

Edit: in the BOE doc it states 4% of mortgaged households in NE.

Edited by bearwithasorehead

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http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2013/qb130406.pdf

Gem of a stat on p.9

Table C Reasons for households not being able to get

a mortgage

Percentages of households who do not own a house and are unable to obtain a

mortgage

Deposit not large enough 82

Credit record not strong enough 42

Unable to afford repayments 25

Unable to afford the monthly repayments if interest rates rise 20

Personal circumstances (for example, being self-employed) 21

Other 8

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Would have been preferable to let public debt run up (it has a negative real cost anyway) and allow the private sector to fully deleverage as they've done in the US, before worrying about public spending.

Yes, but the bankers were worried that the government might not be able to afford their next bailout.

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Osborne is simply pushing public debt back onto the private sector in a vain attempt at re-election.

Would have been preferable to let public debt run up (it has a negative real cost anyway) and allow the private sector to fully deleverage as they've done in the US, before worrying about public spending.

With his HTB schemes on top and by driving back up private sector debt he's really f*cked this one up I'm afraid.

Except the US has better demographics than us to cope with the public sector debt in future

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4 x salary at today's interest rates is ***-all.

When rates go back up to double-digit percentages it could start to look a bit high.

Rates won't nudge past 3% for the next decade so don't worry.

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Rates won't nudge past 3% for the next decade so don't worry.

Unfortunately when prices are at this level a decade at that level isn't enough, it has to be guaranteed at the current low level for the duration of the mortgage or it is irresponsible to buy.

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Unfortunately when prices are at this level a decade at that level isn't enough, it has to be guaranteed at the current low level for the duration of the mortgage or it is irresponsible to buy.

i disagree - ten years is well enough to overpay and clear a big mortgage. I'm trying to find a provider of low ten year fixes in NZ and OZ in case i want to buy somewhere quick, but nothing out there.....

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Yes, a lot of people who bought from 2004 onwards must have huge mortgages and flat wages.

The longer house prices stay high, the more people will be in this situation. Even with repayment mortgages, low wage/price inflation means that they remain substantial for at least 15 years.

If house prices stayed high they wouldn't be in negative equity. You seem to be saying high wage and house price inflation are ways to solve this, is that not how we got in the mess in first place.

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"The Bank's quarterly bulletin, published today, reveals one in 25 families are currently in this precarious position, a disaster if they want or urgently need to sell their home."

It's never a disaster for non-owners who were outbid for years.

Always a worry and disaster for those who gorged on massive mortgage debt and who might need to sell for lower prices that would bring down values for equity rich and outright owners.

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If house prices stayed high they wouldn't be in negative equity. You seem to be saying high wage and house price inflation are ways to solve this, is that not how we got in the mess in first place.

It was loose lending, house prices could be as twice as high, but if lending stayed sane ie 3.5x mans salary and 1x womans like it used to be, then people would have just needed bigger deposits. Or not allowed self certs or I/O high housr prices are the synptoms not the desease

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It's never a disaster for non-owners who were outbid for years.

'Fools'

Always a worry and disaster for those who gorged on massive mortgage debt and who might need to sell for lower prices that would bring down values for equity rich and outright owners.

'Victims'

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