Average UK mortgage debt rises - but householders able to cope with debts

Graham_Devon

The message from the BOE is that the average mortgage debt now stands at £85,000, up £2,000 in the last year.

They also state that due to rising incomes and lower inflation households on average can cope with a rise in base rates to 2%.

They also reveal that should base rates rise to 2% the share of mortgage holders paying over 30% of their income on their mortgage would rise from 9% today to 14%.

You can look at this data in a number of ways. One is to suggest things are OK as interest rates are unlikely to pass 2%.

The other is to question what would happen should rates go to 3% as the data looks pretty bad if 14% of all mortgagees would be paying over 30% of their income on the mortgage at 2%.

The other could be to question "what if inflation kicks off again then" considering one of the reasons the BOE are suggesting things are better than they seemed is because of low inflation rather than anything the household can sort out themselves. Wage rises are already falling back.

Thoughts? I must admit, I was surprised that the research is only done on a base rate of just 2%.

http://www.theguardian.com/business/2015/dec/15/average-uk-mortgage-debt-rises-to-85000-pounds-bank-of-england

Edit: and there is a different take on it here, with different figures. Same kind of conclusion though - everything is OK, with base rates at 2%

http://www.telegraph.co.uk/finance/economics/12051415/Households-can-cope-with-interest-rate-rises-BoE-says.html

cells

For a lot of the country homes are between very cheap and affordable its only really in London and some parts of the SE that prices get unaffordable.

Graham_Devon

cells wrote: »

For a lot of the country homes are between very cheap and affordable its only really in London and some parts of the SE that prices get unaffordable.

But this is not about London in isolation.

It's about the average household with a mortgage. It's about mortgage debt, not house prices.

Going off on a tangent with another finger in the air prediction or assumption that house prices are affordable - with yet another bit about London doesn't do anything to change the statistics.

[Deleted User]

Taking the UK 'average' house price/mortgage for any kind of analysis is pointless - you have to renationalise it.

I just worked out that my mortgage won't drop to £85k until 2036!

This is the fun impact of HPI, younger and younger people getting saddled with more and more debt

wotsthat

An improvement in ability to cope with a rate increase is entirely expected. As time goes by older loans are repaid and replaced with loans issued on more stringent terms.

Only 14% of people paying >30% of income if base rates increase to 2% shows just how choosy mortgage lenders have become - it's nothing.

martinsurrey

Graham_Devon wrote: »

The other is to question what would happen should rates go to 3% as the data looks pretty bad if 14% of all mortgagees would be paying over 30% of their income on the mortgage at 2%.

no real problem at all,

renter pay on average almost 47% of their net wages on rent.

http://www.theguardian.com/money/2015/jul/16/tenants-in-england-spend-half-their-pay-on-rent

(from the same rag you used as a source).

seems to imply that owners are in a much better position than renters even with a rise to 2% base rates