Mortgage affordability in UK level with other countries

According to industry officials affordability on mortgages in the UK is pretty much on level with that in other countries. A study was carried out by Capital Economics, and suggested that when it came to mortgage affordability the UK was no worse off than other countries.

The company conducted research which looked at mortgage affordability in nine major Western economies, and this included Australia, Denmark, France, Ireland, Netherlands, Spain, Sweden, the USA and the UK. The average amount of take home pay that was used for mortgage repayments on a repayment mortgages in these countries came to 48 percent.

Over the past forty years the level of take home pay going on mortgage repayments in the UK has been around 50 percent. The highest level of take home pay going on mortgage repayments was found to be in Sweden, where 56 percent of pay went on mortgage repayments. The cheapest was in Spain, where 39 percent of take home pay went on mortgage repayments.

One economist involved in the research said that many may have expected the level of take home pay that was being spent on mortgage repayments in the UK to be higher due to high population density and undersupply of housing, but he stated that this was not the case.

He stated: “Our analysis shows that over the past 40 years, long-run average UK mortgage affordability is unremarkable in an international context. To our minds, this casts doubt on the popular view that a chronic undersupply of homes in the UK supports high prices.”

At present the actual level of take home pay going on mortgage repayments in the UK is 44 percent, and this comes from the record low base rate of 0.5 percent, which has reduced mortgage repayments considerably for those on variable rate mortgages.

Tags: record, mortgage, past 40 years, variable rate mortgages, Repayment mortgage, pay, Mortgage loan

Homeowners being moved from interest only mortgages to repayment mortgages

The fears over a double dip recession in the UK are causing havoc for many homeowners who are finding themselves being shifted from interest only mortgages with smaller monthly repayments to capital and interest mortgages that require them to make much higher monthly repayments on their mortgages. For many this will cause serious financial problems, as it will really impact on their outgoings and ability to make repayments.

A number of lenders are said to have brought in new rules and regulations with regards to this issue, and this includes the Spanish owned Santander and the banking giant Halifax. Many borrowers who do not have enough equity in their homes and are coming to the end of an interest only special deal are being shifted onto the more costly repayment mortgage by these lenders.

The move comes following concerns that the UK could be heading for a double dip recession, and a number of industry experts have said that homeowners could lose the equivalent of the average salary from the value of their homes, which will see equity levels plunge further for many homeowners. Santander has revealed that anyone that has less than 25 percent equity in their homes will be moved from their interest only mortgage onto a repayment one.

One mortgage expert said: “For home owners with interest-only mortgages, a forced switch onto a repayment deal by their lender at the end of their fixed or discounted period would lead to a significant rise in their monthly payments. For those saddled with big mortgages, it may well be an unaffordable increase, making it difficult for them to make ends meet. Lenders are worried about a further downturn in prices and are introducing these changes to protect themselves, as well as borrowers. But hard-pressed homeowners may find it’s an extra cost too far.”

Tags: homeowners, santander, Mortgage loan, fears, Interest-only loan, Repayment mortgage, Many borrowers, mortgage