Friday, Jun 30, 2006

Britons spend 40 per cent of earnings on mortgages

Daily Mail: Britons spend 40 per cent of earnings on mortgages

Mortgages amounting to nearly the same as the nation's GDP are costing the average household as much as they did in 1991. Which was, you remember, a great year for house prices.

Posted by Gruppenguhrer @ 08:36 AM (571 views)
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1. Bigguy said...

Mortage payments account for 42% of take home pay. How bout Credit Card repayments, anyone got a figure on this ?? Also wondering whether anyone knows where we can look at a chart showing debt repayments against take home pay ??

Friday, June 30, 2006 09:38AM Report Comment

2. Bigguy said...

So mortgage repayments now account for 42% of take home pay. And how much more is used for Credit Card repayments ??

Does anyone know where we can see a chart showing the % of take home pay that is debt repayment ??

Friday, June 30, 2006 09:41AM Report Comment

3. Gravity's Rainbow said...

As usual with the Daily Mail, the article is very misleading. The headline statistic is derived from the calculation that someone on an average salary buying an averagely priced house would need to spend 42% of their take home pay on mortgage repayments.

It is an abstract statistic rather than a real world one. Anyone who bought their house prior to the boom (i.e millions of people) will be spending much less on their mortgage repayments than 42% of take home pay.

Friday, June 30, 2006 11:23AM Report Comment

4. Distant_daz said...

42% my arse. If I had a mortage for a modest (could I get anything else) place mortage repayments would be significantly higher than 42%, more like 65%.

Friday, June 30, 2006 11:39AM Report Comment

5. denzil said...

>>And how much more is used for Credit Card repayments ??

It's a good point and I seem to recall the average non-mortgage debt in the UK is 7700. If that non-mortgage debt is purely credit card then the just paying the minimum 2.5% per month will be around 192. In fact at 2.5% it would take somebody a long time to pay it off. It's criminal that the minimum payment was dropped from 5% to 2.5%.

On a related issue in most case credit card debt is a choice, mortgage payments or more accurately a home is a neccessity. That doesn't change the fact that 40%+ of take home being spent on a mortgage is a lot of money and leaves little for much else especially if the payer is only on average income i.e 40% for a person on 100K per annum still leaves a nice lot of spending money.
The point I am trying to make is that credit cards in almost all cases are a choice and if anyone says that a credit card is a neccessity then they probably need to look at their expenditure.

Credit cards are not a bad thing though. I bought an IPOD with the money Amex paid me to use their card for a year. I'm a sad f*** who puts everything on my card and pays in full every months and I can assure you it gives me immense satisfication that Amex and Mint pay me to use their cards.

Friday, June 30, 2006 12:09PM Report Comment

6. Gregzki said...

I may have read this wrong but it seems these figures assume a deposit of approx 25%? Still nice for the Daily Mail to run with a headline hinting at problems in the market/affordability.

Friday, June 30, 2006 01:28PM Report Comment

7. Contentorent said...

There's actually some sensible comments built up on that article now. Never thought I'd see that in the Daily Male. Unless HPC'ers have been at it trying to undermine the VI's ... not a bad idea come to think of it.

Friday, June 30, 2006 02:17PM Report Comment

8. sebastian said...

"What is everybody's problem with high house prices? It has made millions richer than they could ever have imagined and allowed them to borrow against their house's new worth to finance the High Street shopping binge of recent years.

If we don't keep spending the economy will grind to a halt. House prices need to keep rising so that we can borrow more and spend more.

- Peter Taylor, Manchester"

This guy forgot his sarcasm tags.

Friday, June 30, 2006 03:49PM Report Comment

9. sebastian said...

Heh, sorry I notice someone else already replied to that. I love this idea of perpetual motion though, how on earth can someone think that it is possible to carry on borrowing against something forever...

Friday, June 30, 2006 03:51PM Report Comment

10. The Bald Man said...

Just keep in mind the following: Debt is real. Asset values are an illusion. When the value evaporates only debt is left!!

Friday, June 30, 2006 05:07PM Report Comment

11. inbreda said...

I think I know Peter Taylor from Manchester - wasn't he the one who had his picture taken for the Manchester Evening News after he spent three and a half days trying to open a door by pulling instead of pushing?

Friday, June 30, 2006 05:20PM Report Comment

12. Dave Lammi said...

I went to see how much I could borrow and it's 4.25 time my basic pay. So the repayments each month are 41% of my Income. It still only stretches to a 1 bed flat out of town. I'm not willing to borrow so much for so little. But interest rates are historically low, and only set to go one way, Inflation is slow so wages aren't easing the pressures so quickly.

Friday, June 30, 2006 05:48PM Report Comment

13. Nnails said...

Same problem here. Why would i want to spend a hugh amount of money on crappy place to live. I have moved back home. A lot more space and hotel mum and dads rents is very cheap

Saturday, July 1, 2006 01:00AM Report Comment

14. sirgoogle said...

"Nationwide warned that this is the highest level since the dark days of the 1991 recession when house prices fell sharply"

If its as bad as that we are in for a rough ride. In 1991 interest rates were 15% (I remember this vividly) and yes repayments were around 40-50% of income. This time we have the same problem at ~5-6% (which means that the capital borrowed by each of these households must be massive) and interest rate rises are on the cards (base rate predicted to go to 5% real soon). There will be a lot of repossessions over the next few years.

To get out of this one we should all pray for a severe increae in inflation to whittle the debt away, otherwise we will all be making mortgage payments well into our retirement

Saturday, July 1, 2006 12:53PM Report Comment

15. bidin'matime said...

But, SirG, severe inflation can only mean one thing - even higher interest rates - with all that this entails. There really is no easy way out of this - at least, for the country - for the individual it's sell up and sit tight!

Saturday, July 1, 2006 10:35PM Report Comment

16. sirgoogle said...


Agree. For the BoE they really need to get their timing right, If inflation runs away before they raise interest rates they will need to make bigger jumps in base rate increases to chase the inflation - which will lead to kangeroo-ing of the economy with the popping of bubbles everywhere and the danger of recession. If they act too soon they will cool the economy but with the added danger of a lengthy recession - which may (or may not) also pop some of the bubbles. I do not envy them.

Sunday, July 2, 2006 08:37AM Report Comment

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