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Chubbs

Ftbs Record Burden

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"Figures from the Council of Mortgage Lenders (CML) show that first timers are now borrowing an average of 3.33 times their incomes to buy a home...

With interest rates having risen four times in the past year, interest payments now take up 18.7% of the average first-time buyer's income...

The CML calculates that the average two-year, fixed-rate, borrower whose deal will end later this year originally had a mortgage of around £114,000...

The proportion of them who bought a flat or house worth more than the £125,000 threshold, for paying the initial 1% rate of stamp duty, was 58% in April - up from 51% a year before. "

http://news.bbc.co.uk/1/hi/business/6743929.stm

If the average FTB mortgage is now around £125k (inferred from last two paragraphs), then a 3.33 multiple gives the average FTB salary as £37.5k - which says a lot in itself.

If this is £3125pcm before and about £2200 pcm after tax, then 18.7% of these figures (the mortage repayment) are £584 / £400pcm. Common sense and experience says it's certainly not the latter figure, and is probably higher than the first.

The non-rose-tinted-spectacles version suggests that FTBs are actually spending ~27% of their take-home pay on their new mortage every month - not taking into account any pensions contributions that they also have taken out before their salary gets to them. Ouch.

Also the highest level since 1992....getting close to a date that rings a belll....?

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"Figures from the Council of Mortgage Lenders (CML) show that first timers are now borrowing an average of 3.33 times their incomes to buy a home...

With interest rates having risen four times in the past year, interest payments now take up 18.7% of the average first-time buyer's income...

The CML calculates that the average two-year, fixed-rate, borrower whose deal will end later this year originally had a mortgage of around £114,000...

The proportion of them who bought a flat or house worth more than the £125,000 threshold, for paying the initial 1% rate of stamp duty, was 58% in April - up from 51% a year before. "

http://news.bbc.co.uk/1/hi/business/6743929.stm

If the average FTB mortgage is now around £125k (inferred from last two paragraphs), then a 3.33 multiple gives the average FTB salary as £37.5k - which says a lot in itself.

If this is £3125pcm before and about £2200 pcm after tax, then 18.7% of these figures (the mortage repayment) are £584 / £400pcm. Common sense and experience says it's certainly not the latter figure, and is probably higher than the first.

The non-rose-tinted-spectacles version suggests that FTBs are actually spending ~27% of their take-home pay on their new mortage every month - not taking into account any pensions contributions that they also have taken out before their salary gets to them. Ouch.

Also the highest level since 1992....getting close to a date that rings a belll....?

Just to be clear and using the example posted by Chubbs the CML's figure of 18.7% appears to be in respect of GROSS income that is used to pay mortgage interest. This is a dreadfully inaccurate statement for the CML to make. As Chubb states the mortgage interest paid by FTB appears to be around 27% of NET INCOME. With capital payments on the mortgage and pension contributions and of course student loan payments to come out the mind boggles at what the percentage of net income is left to start living. I would not at all be surprised if it was less than 50%.

I suspect many FTB are doing I/O and presumably leaving, for the time being, their pension arrangements

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Just to be clear and using the example posted by Chubbs the CML's figure of 18.7% appears to be in respect of GROSS income that is used to pay mortgage interest. This is a dreadfully inaccurate statement for the CML to make. As Chubb states the mortgage interest paid by FTB appears to be around 27% of NET INCOME. With capital payments on the mortgage and pension contributions and of course student loan payments to come out the mind boggles at what the percentage of net income is left to start living. I would not at all be surprised if it was less than 50%.

I suspect many FTB are doing I/O and presumably leaving, for the time being, their pension arrangements

Surely they wouldnt use GROSS ? I mean come on!!!!!

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