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Burden of mortgage fell during recession

Nia Williams

May 13, 2013

In 2008/10, the share of households who felt making payments was ‘a heavy burden’ fell in all regions except Wales (up from 12.1% to 13.5%) and the North East (up from 10.6% to 15.6%).

More households in the South West with property liabilities reported these ‘a heavy burden’ than any other region (16.5%). Scotland contained the fewest households considering their property debt to be ‘a heavy burden’ (8.2%).

Mark Dyason, director of Edinburgh Mortgage Advice, said: “It’s encouraging that fewer households between 2008 and 2010 considered their property debt a heavy burden relative to the period 2006/2008.

“The sharp cut in interest rates clearly played a role in this and despite the tough economic conditions will have massively lightened the debt burden for a huge number of households.

“With interest rates having been so low for so long now, you would think this trend away from property debt being perceived as a heavy burden would have continued from 2010 onwards.

“Housing Equity Withdrawal figures from the Bank of England have consistently shown that households have been paying down their debt, which suggests the debt burden will have become lighter.

“What matters now is when interest rates rise. There is a strong correlation between interest rates and the weight of property debt. When rates go up, many more areas of the UK are likely to experience their property debt as a heavy burden.”

For those households with property debt on their main residence, the median size of a mortgage rose in cash terms between 2006/08 and 2008/10, from £70,000 to £75,000.

In 2008/10, median property debt was highest in London (£128,000) and lowest in Scotland (£55,000).

In the least wealthy fifth of households only 8.0% owned their main residence with 7.8% having a mortgage.

However in the wealthiest fifth of households, 96.8% of households owned their main residence, with 40.4% having a mortgage.

Wales had the highest share of households owning their main residence outright (37.0%), with London (22.6%) having the lowest.

Dyason added: “The performance of local economies has also had an impact on the perception of property debt. In the North East and Wales, where the economy has been hit harder than other areas, more households feel their property debt as heavier irrespective of low interest rates. High inflation and low wage inflation will also have contributed to this.

“Unsurprisingly, given the gravity-defying house prices in the capital, London has the lowest percentage of households owning their main residence outright.

“Unless you’re very wealthy, or bought many moons ago, how many people can own their home outright in London?”


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