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Fool.co.uk Issues Housing Market Warning

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For those not familiar, fool.co.uk are a respectable financial website, despite the name

Fool.co.uk issues housing market warning

"Fool.co.uk has indicated that household finances in British homes are at breaking point

With virtually no safety margin in the average household budget, a further rise in interest rates could tip many homeowners over the edge, according to a study by personal finance website Fool.co.uk.

Currently, the gross income of the average household in the UK is £32,800. This equates to a net income of £26,700 after adjusting for the receipt of benefits and the deduction of direct and indirect taxes. While this comfortably exceeds average household expenditure of £20,800 (2) before mortgage payments, it only tells part of the story.

The single largest item of expenditure for most households is mortgage payments. At around £6,600 a year, mortgage payments account for almost a quarter of total household expenses in the average UK home. As the average outstanding mortgage is £95,900 , this would suggest that, on the whole, homeowners may still be benefiting from historically low interest rates fixed at around 4.8 per cent.

However, after deducting total outgoings from total income, the average household does not have any slack in its budget. In fact, there is a small shortfall of around £50 a month.

Over the short-term this is manageable. But with typical standard variable rates of 7.5 per cent , homeowners could face a hefty shortfall of around £1,900 a year when their fixed-rate mortgage deals expire. Furthermore, around 15 million households on below-average income may be disproportionately affected.

David Kuo, head of personal finance at Fool.co.uk, said: “The signs are not good for overstretched homeowners, and by implication the housing market. With almost no contingency left in their budgets, another rate rise, even a small one, could see many homeowners struggling to meet higher mortgage costs.

Homeowners need to act swiftly. It is vital that they revisit their budgets now and identify where savings can be made. The average household may need to cut annual outgoings by as much as a tenth when their current fixed-rate deals expire.

It can be argued that statistics can prove anything you want, or as the man with his head in a fridge and his feet in the oven once said: On average I feel quite comfortable. But burying your head in the sand is not a sensible option. Homeowners need to take active steps now. "

Edited by wrongmove

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However, after deducting total outgoings from total income, the average household does not have any slack in its budget. In fact, there is a small shortfall of around £50 a month.

I wonder if the average household buys coffee from Starbucks and sandwiches from Pret? How much do they spend on Sky subs and on the latest and greatest cellphone... My guess is that there's loads of places where they will be able to trim. It's the knock-on effect from economising, rather than immediate household difficulties, which will trigger problems in my view.

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Over the short-term this is manageable. But with typical standard variable rates of 7.5 per cent , homeowners could face a hefty shortfall of around £1,900 a year when their fixed-rate mortgage deals expire. Furthermore, around 15 million households on below-average income may be disproportionately affected.

Wouldn't the current high level of food/core inflation coupled with slightly higher fixes than they previously enjoyed do it just as much as 7.5% SVR.

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I wonder if the average household buys coffee from Starbucks and sandwiches from Pret? How much do they spend on Sky subs and on the latest and greatest cellphone... My guess is that there's loads of places where they will be able to trim. It's the knock-on effect from economising, rather than immediate household difficulties, which will trigger problems in my view.

If this was about rational human beings then I'd agree with you but a lot of these guys are from the buy now pay later generation who see Starbucks and Pret as essentials and their right and hence they won't just give them up as you and I might. I was in the Porsche garage recently and to my dismay there was a 30 year old in there who when asked what model he wanted said "it doesn't matter but its got to be less than £750 per month as thats all I can afford".

Thats why -£50PM is a problem IMO

SB

Edited by strbear

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If one more interest rate will push many households over breaking point then how the hell are people still managing to spend money thus driving inflation. Surely if one more will push people to breaking point then they should be at the point now where they are really tightening the purse strings?

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If one more interest rate will push many households over breaking point then how the hell are people still managing to spend money thus driving inflation. Surely if one more will push people to breaking point then they should be at the point now where they are really tightening the purse strings?

Ah, the marvels of MEW...

When people realise that they can no longer rely on their homes as ATMs, the penny will drop. That's if they haven't been repossessed by that time, of course. <_<

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and the fool.co.uk is traditionally 6 months behind the curve. I remember them banging on about how shares ALWAYS outdid property (in 1999). 6 months later... >CRUMP<

So in other words...

IT'S ALREADY BEGUN!!!

Q107

It was PG what won it!

:lol::P:lol:

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and the fool.co.uk is traditionally 6 months behind the curve. I remember them banging on about how shares ALWAYS outdid property (in 1999). 6 months later... >CRUMP<

So in other words...

IT'S ALREADY BEGUN!!!

Q107

It was PG what won it!

:lol::P:lol:

Hows the conversion of the 15th century french outhouse going PG. Any Pics?

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If this was about rational human beings then I'd agree with you but a lot of these guys are from the buy now pay later generation who see Starbucks and Pret as essentials and their right and hence they won't just give them up as you and I might. I was in the Porsche garage recently and to my dismay there was a 30 year old in there who when asked what model he wanted said "it doesn't matter but its got to be less than £750 per month as thats all I can afford".

Thats why -£50PM is a problem IMO

SB

Good point. He'll probably end up getting the Porsche repossessed and selling all the other toys he's doubtless bought on ebay, taking a huge loss 'cause nobody's buying, and then fall back on an IVA or bankruptcy. At least toys are by definition discretionary/disposable. Perhaps the best approach for debt-junkies is NOT to own a home; debt is a much bigger problem if you have an asset you really want to keep...

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