Mortgage costs add to housing slump problems

 

May 14, 2008

A recent report has shown that the huge chink of income that many homeowners are having to pay out on their mortgages has added to the risk of a major housing slump in the UK. A study was recently carried out by Capital Economics, and showed that the amount that homeowners are forking out on their mortgages could be higher than the previous record seen in the 1980s, with many now thought to be shelling out up to one third of their income on their mortgage.

An official from Capital Economics claims that the current financial climate means that there could be a major house price crash similar to the one that was seen in the 1990s. This has been further fuelled by the effects of the global credit crunch, which has resulted in lenders making it far more difficult for consumers to get finance through tightening their lending criteria, and has also made it far more expensive for consumers to get the finance that they need as a result of lenders hiking up interest rates and costs.

The data showed that those taking out a mortgage over the traditional twenty five year repayment period could end up paying up to 32% of their income on their mortgage. This will result in household finances becoming increasingly strained for homeowners, and could impact on many areas including the economy and the housing market. It is thought that the amount being spent on mortgage repayments is around a third higher than it was in its previous peak in the 1980s.

Many industry experts are now expecting the risk of a housing slump and house price crash to increase as a result of the current financial climate, with many predicting that the problems in the housing market will continue over the next couple of years.

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Written by admin · Filed Under Mortgages 

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