Renting more expensive than mortgage repayments

In years gone by many people have rented homes rather than buying because the monthly cost of renting has been considerably lower than the cost of paying off a mortgage each month. However, recent figures have shown that this has gone into reverse, and after a very turbulent few years in the property market it has actually become cheaper each month to pay a mortgage than to pay rent.

According to the figures it costs around £709 per month to rent the average three bedroom property whereas the same property would cost £608 per month in mortgage repayments. This makes it around £100 cheaper on average to make mortgage repayments than to pay rent on a home. On the other hand just a couple of years ago it would have cost £1060 for the same property to pay a mortgage each month and just £761 to pay rent each month.

There have been many changes in the property and mortgage markets that have led to this change. This includes the base rate remaining at a record low of just 0.5 percent for over two years, which has kept mortgage repayments lower. The lack of availability of mortgages for first time buyers, driven by restrictions from lenders and demands for higher deposits, has led to soaring demand for rented homes, and this in turn has resulted in rental costs rising.

One industry expert said: “Such a marked decline in mortgage costs has improved affordability for those able to enter the market as well as helping to ease the pressure on existing home owners’ disposable income. Although the current trade-off between buying and renting is expected to narrow when interest rates start to rise again, the long-term benefits associated with investing in bricks and mortar are likely to ensure that buying will continue to be viewed favourably by many.”

Tags: existing home, record, GBP, availability, disposable income, lack

Festive spending not affected by disposable income

Consumers will still buy what they need to be able to celebrate Christmas properly, even if their disposable income does not facilitate such spending, an industry expert has said.

According to the British Retail Consortium (BRC), both consumer confidence and disposable income have fallen this year, meaning that people may both be and feel “less well off”.

Head of media at the BRC, Richard Dodd explained: “[This] is a result of interest rate rises and also other costs having risen sharply, as well as mortgages, including utility bills, fuel bills and tax bills.”

He added that despite people being less well off and having less to spend, people will still “have the presence of the food and drink they want for Christmas”. This means that retailers will not suffer dramatically even though it may not be a “spectacular” year.

Deloitte have released predictions for spending which, it says, will increase by seven per cent on last year’s figures, with average spending per capita estimated at £706 up from £662 last year.

Tags: fuel bills, Personal life, disposable income, cent, fuel, year, tax

Mortgage payments up 15%

Mortgage payments across England and Wales are increasing, leaving many homeowners in a precarious situation.

New figures, published by Woolwich Mortgages, shows that mortgage payments in April of this year reached £590.

That is an increase of £78 on the figure for the same month in 2006 and signals a rise in costs of 15 per cent.

Clearly this is going to have an effect on the financial situation of many homeowners and this is compounded by the fact that household net earnings have only increased by five per cent in the same time period.

Andy Gray, head of Woolwich Mortgages, is concerned that many people will be beginning to feel the pinch, especially if further interest rate rises are introduced.

“Mortgage borrowers are really getting squeezed. With the costs of council tax, petrol, food and drink, as well as mortgages, all increasing, consumers are seeing a large amount of their earnings being diverted to essentials, putting real pressure on disposable income,” he said.

“Most commentators are suggesting that interest rates will increase further this week. However, our research shows that that the three interest rate increases over the last 12 months are already starting to have a major impact on borrowers.”

The figures released for April put mortgage payments at the highest level they have been since Woolwich began collating the data in 2002.

Tags: commentators, head, precarious situation, disposable income, interest rate, research