Mortgage payments 'placing added pressure on incomes'

Posted: 04 Oct 2006 14:18:27 GMT

Mortgages are taking a much larger chunk of homeowners' incomes than they did ten years ago, a new report claims.

Mortgages are taking a much larger chunk of homeowners' incomes than they did ten years ago, a new report claims.

Average house prices have almost trebled since 1996, while salaries have doubled over the past decade, meaning that Britons are spending a larger proportion of their salaries on average mortgage repayments.

With demand for property showing no signs of weakening and experts predicting increases of as much as 40 per cent over the next four years, the percentage of wages take up by mortgage repayments is expected to rise still higher.

The amount of pre-tax salary being spent by homeowners on mortgage repayments has soared from just 16.5 per cent in 1996 to 24 per cent today, with this figure rising to 27 per cent for first-time buyers.

Personal finance website Moneyfacts has compared economic and mortgage data for today with equivalent statistics from 1996 and has warned that shortages in housing supply are squeezing UK households.

The report points out that the abolition of Mortgage Interest Relief at Source (MIRAS) is a key factor in the difference in costs for homeowners, alongside housing market growth dramatically outstripping wage inflation.

Moneyfacts head of news and press, Andrew Hagger, said: "The net effect is that mortgage payments take a much bigger chunk of our income than they did in 1996. This statistic looks gloomy enough in its own right, but when you factor in additional increased expenses such as higher council tax and utility bills, it is no surprise that the UK is now faced with the current personal debt crisis."

First-time buyers are finding it increasingly difficult to get a foot on the property ladder, as demand continues to outstrip supply and house prices soar.

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