Young Couples Face Work Bondage
The rise in house prices seen over the last few years is likely to have a detrimental effect on a generation of young couples. The huge mortgages that they have to take out to acquire their homes may have the effect of creating a society divided into haves and have-nots not seen in Britain for over a century.
Those first-time buyers who do manage to buy a home and start on the property ladder are having to take out such large mortgages that they are tied to their jobs simply to create the income to pay for their homes.
An academic report entitled ‘On The Treadmill’ suggests that the massive loans taken out by parents are forcing them to abandon their young children so that they can work long enough hours, and even take on second jobs to pay mortgages which can be as great as seven times their original salary.
The British Bankers’ Association has reported that the average loan for a home is now at £152,800 – a record. Compare this with the 1984 figure of £50,000. A £150,000 mortgage loan has monthly repayments of about £1,100, which represents 75% of what an average worker will take home in monthly wages. In the south of England the situation is more extreme, with average house prices in London now at nearly £400,000, and borrowers having to take mortgages of £300,000.
The report suggests that young homeowners are becoming ‘bonded labourers’ tied to their jobs in order that that can pay their huge loans, and doing extra hours to be able to do so. Families will come under increasing stress as a result, with less time for home life and little disposable income. On average mortgages have increased by around £12,500 in the past 12 months.
The study of the 18-40 age range says that these trends could create a divide society not seen since the early 20 th Century, as debt levels rise to unprecedented levels.
For those couples who simply cannot afford to buy anywhere, they will delay marriage and having children while they save for a home. Trends such as living with parents, living in shared houses, or renting accommodation will increase, taking people into their thirties before they can buy a home.
The danger of the burden of a huge mortgage is more than just financial, as couples will find their family lives stretched, and their children not being brought up in an ideal family environment. A home is more than just a large house.
Families having to rent are struggling as rents have had to rise with the increase in house prices and mortgage repayments. The Halifax says that house prices are still rising, at 10.9% per annum – way above inflation. One estimate suggests that key workers such as fire fighters, police, teachers and nurses cannot buy homes in 70% of towns.
Bank rates have risen four time since last August, taking the base rate from 4.5% to 5.5%, exacerbating the dire mortgage situation. Forecasts are for the rate to reach 6% before the end of the year.
More young couple are having to turn to their parents for financial assistance. Historically only 25% of buyers had help from parents; in the last three years this number has risen to 40%.
Tom Smith
9th June 2007
Recent Mortgage News:
- Mortgage levels start to fall [07.06.07]
For many months industry professionals have been surprised at the continuing thriving mortgage industry, despite rising property prices and rising interest rates. However, it seems that the fourth rise in interest rates in the space of a year along with sky high property prices is finally taking its toll, as mortgage levels have finally started to decline.
- Continued interest in fixed rate mortgages [06.06.07]
Over recent months fixed rate mortgages have been rising in popularity with the threat of rising interest rates hanging over the heads of mortgage payers all across the UK.
- Interest rate rise exceeded by some lenders [04.06.07]
Over the past year mortgage holders on variable rate mortgages have really felt the pinch, with no fewer than four interest rate rises being enforced by the Bank of England since August of last year.
- Number of landlords set to increase [03.06.07]
According to recent reports the number of buy to let landlords in the UK could increase by one hundred percent over the next three years, with a rising demand for rental properties seeing an increased number of consumers expressing an interest in purchasing a property with a view to renting it out.
More Information:
- What Are Tracker Mortgages?
With a multitude of mortgages available what are the benefits and disadvantages of the product known as a tracker mortgage?
- Why Does The Interest Rate Of Your Mortgage Change?
The biggest difference between a mortgage and other types of loan is the fact that the interest rate changes throughout the term of the loan. Why is this? And which type of interest-rate arrangement is best?
- Choosing The Right Mortgage
The market is flooded with different types of mortgages, but how do you know which one is right for you? The decision has to be yours, whether you take advice from an Independent Financial Advisor or do your own research.
- Different Types Of Mortgage
Rather like a full house in poker there seems to be a wide selection of mortgages on the market, but aren’t many of them the same kind of product?
External Links:
