Household property debt hits a trillion

Sarah Davidson

July 27, 2015

A report from the Office for National Statistics revealed in 2010 to 2012 the total financial debt for Great Britain was estimated to be £104bn, an increase from £96bn in 2008 to 2010.

Half of households owning their main residence with a mortgage owed at least £80,000, an increase from £50,000 in 2008 to 2010. The mortgage value on other properties remained at a constant £84,000 from 2008 to 2012.

London had the highest median property debt across the six years. In 2010 to 2012, it recorded a median of £131,000 in debt.

This was followed by the South East with £105,000. In comparison the lowest median property debt came from Wales (£56,000), North West (£62,000) and the North East (£63,000).

Scotland’s median debt has increased by £20,000 between the years or 2006 to 2008 (£50,000) and 2010 to 2012 (£70,000).

Some 19.8% of households reported a heavy financial debt burden with 5.8% of individuals in the highest net income decile reporting a heavy burden compared to 33.9% of individuals in the lowest decile.

A further 3.2% of household’s highest wealth decile reported that they have a heavy debt burden. This burden increases to 39.6% in the lowest decile.

Heavy burden of property debt improved from 11.3% in 2008 to 2010 to 10.6% in 2010 to 2012.

Households in the highest wealth decile are less likely to have a heavy property debt burden

(2.4%), compared to 42.1% of households in the lowest wealth decile.

And 4.1% of households in the highest income decile reported having a heavy debt burden compared to 19.2% of households in the lowest income decile.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “There is a real risk that after more than six years of record low interest rates, many mortgage-payers are still living in a false sense of security. The reality is that they may have a very short window in which to prepare for coming hikes in interest rates.

“Just last week, the governor of the Bank of England placed interest rate rises firmly on the horizon, with commentators expecting a rise as early as the New Year. Households urgently need to conduct a financial healthcheck to make sure they will be able to cope with higher costs – be they higher mortgage payments or higher interest payments on outstanding balances on credit cards and personal loans.

“We should be particularly concerned about younger homeowners, many of whom have never experienced a rate rise, as well as mortgage payers who are currently out of work or on income-related benefits.

“In particular, 183,000 households currently receive payments under the Support for Mortgage Interest scheme. With the amount payable having just been reduced and the announcement in the budget that these payments could be converted from a benefit into a loan, many of these households face an uncertain future.

“Furthermore, while this ONS report looks at mortgages alone, we must not forget there are a growing number of people struggling with another kind of property debt – private rent arrears. They too will be affected by higher interest rates through rising rents as extra mortgage costs are passed on by landlords.”

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