Provider warns of housing crash
- Published: 14/06/2007
The UK is on the brink of a housing crash, according to a new report.
A study from personal finance site Fool.co.uk says that any further interest rate rises could push householders over the edge - as their finances are already severely stretched.
According to its figures, the gross income on the average UK household is £32,800 - equating to a net income of £26,700 after taxes. This does exceed average household expenditure of £20,800 before mortgages - but, when the average mortgage repayment of £6,600 a year is added on, expenditure actually exceeds income by around £50 per month.
With the average outstanding mortgage totalling £95,500, Britons may still be taking advantage of historically low interest rates fixed at around 4.8 per cent.
"The signs are not good for overstretched homeowners, and by implication the housing market," David Kuo, head of personal finance at Fool.co.uk, says.
"With almost no contingency left in their budgets, another rate rise, even a small one, could see many homeowners struggling to meet higher mortgage costs.
"Homeowners need to act swiftly. It is vital that they revisit their budgets now and identify where savings can be made. The average household may need to cut annual outgoings by as much as a tenth when their current fixed-rate deals expire.
"It can be argued that statistics can prove anything you want, or as the man with his head in a fridge and his feet in the oven once said: 'On average I feel quite comfortable.' But burying your head in the sand is not a sensible option. Homeowners need to take active steps now."
A study from personal finance site Fool.co.uk says that any further interest rate rises could push householders over the edge - as their finances are already severely stretched.
According to its figures, the gross income on the average UK household is £32,800 - equating to a net income of £26,700 after taxes. This does exceed average household expenditure of £20,800 before mortgages - but, when the average mortgage repayment of £6,600 a year is added on, expenditure actually exceeds income by around £50 per month.
With the average outstanding mortgage totalling £95,500, Britons may still be taking advantage of historically low interest rates fixed at around 4.8 per cent.
"The signs are not good for overstretched homeowners, and by implication the housing market," David Kuo, head of personal finance at Fool.co.uk, says.
"With almost no contingency left in their budgets, another rate rise, even a small one, could see many homeowners struggling to meet higher mortgage costs.
"Homeowners need to act swiftly. It is vital that they revisit their budgets now and identify where savings can be made. The average household may need to cut annual outgoings by as much as a tenth when their current fixed-rate deals expire.
"It can be argued that statistics can prove anything you want, or as the man with his head in a fridge and his feet in the oven once said: 'On average I feel quite comfortable.' But burying your head in the sand is not a sensible option. Homeowners need to take active steps now."