Mortgage debt “more of a burden”

3 October 2006

It appears that keeping up with mortgage repayments swallows up far more of our salaries today than it did in 1996. Research from the financial information company, Moneyfacts, suggests that on average, mortgage payments account for 24% of people’s pre-tax salary today. In 1996, just 16.5% of households’ salaries went on mortgage payments.

And the reasons? The ending of tax relief on mortgage interest and larger mortgage debts.

Moneyfacts says that first-time buyers in particular are finding a far greater percentage of their salary is going on mortgage debt than was the case 10 years ago. Mortgage debt accounts for nearly 27% of first-time buyers’ salary compared to 18% in 1996.

Average incomes for first-time buyers have nearly doubled in the past ten years – but this lags behind rising house prices. In the past decade, Moneyfacts says that average house prices have soared from £64,692 to £181,122. Therefore, what’s happened is that, while incomes have risen, they haven’t kept up with housing costs – and hence a greater proportion of salaries are going on meeting mortgage repayments.

Andrew Hagger of Moneyfacts said this was a worrying development. He said: “This statistic looks gloomy enough in its own right. 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 finance debt.”