Thursday, May 10, 2007

The Debt Burden

Later today it is widely predicted that the Bank of England will announce another increase in interest rates.

This will add to the burden already faced by those with mortgages, especially those who own their first property.

Data from the Council of Mortgage Lenders (CML) revealed that first-time buyers in March spent an average 18.3% of their income on mortgage interest payments, compared with 18% in February and 16% in the corresponding month last year.

The proportion of first-time buyers' income swallowed by mortgage payments is the highest figure since 1991, when interest rates were over 10%.

David Stubbs, senior economist at the Royal Institution of Chartered Surveyors, said:

"First-time buyers now face huge barriers to home ownership. They have to save large amounts for deposits, stamp duty and fees and then must spend an ever increasing share of their income on servicing the massive mortgage needed to buy a home.

With higher interest rates on the way, the situation looks certain to deteriorate further in the coming months

The success of the British economy is underpinned by the housing market, the success of the housing market is underpinned by people's (especially first time buyers) willingness and ability to pay.

The Bank of England should have a care when adding to the burden of these already over indebted individuals.

No comments:

Post a Comment