Interest rate rise could mean mortgage disaster - 20/07/2006
Home owners in the south already spend 56 per cent of their take home pay on their mortgage
Home information packs - July News - Bank of England base rate spells disaster
The prospect of a slight interest rate rise this year would be a huge blow for home owners struggling to foot their mortgage repayments. Figures recently released show that if the cost of borrowing rises an average earner purchasing an average property with a deposit of 20 per cent will have to pay almost half of their take home pay on mortgage interest payments.
The Cheltenham and Gloucester Building Society said that even the smallest rise of 0.25 per cent in interest rates before the end of the year would result in the highest level of payments since 1991 when home repossessions reached a record amount.
The worry for homeowners was the fact that inflation has risen to 2.5 per cent, meaning an interest rise was increasingly likely. If the rates do increase, the first in two years, the average increase in monthly mortgage repayments will mean those paying £795 will soon be forking out £854.
On average, home owners in the south-east of England pay the highest proportion of their take home pay on mortgage repayments at 56 per cent, followed by those in the south-west at 52 per cent and 51 per cent in London, Scotland with its lower property prices means that home owners need only put 36 per cent of their monthly pay towards the cost of their mortgage.
It's no better if you are a first time buyer, the Nationwide says that the affordability of starter homes has 'deteriorated significantly' because the cost of property and salaries have failed to remain anywhere inline.
Home information packs - July News - Bank of England base rate spells disaster
