A recent study has suggested that the risk of a major housing slump has been heightened as a result of homeowners having to spend a huge chunk of their household income on their mortgages. A recent Capital Economics study suggests that homeowners could be spending up to a third of their income on their mortgage, which the study claims is higher than the previous peak, which was recorded in the 1980s.
Lenders are continuing to make mortgage borrowing increasingly expensive as the credit crunch continues to wreak havoc in the UK’s financial markets. In addition to increasing interest rates on mortgages lenders are also tightening up on their lending criteria, which has made it more difficult for many people to get the mortgage that they need. One researcher from Capital Economics claimed that the current financial climate meant that the UK could face a housing market crash as bad as the one that was seen in the 1990s.
The research also indicated that new borrowers who were taking out a mortgage loan over a twenty five year period would have to pay out around 32% of their income on mortgage repayments, which meant stretching household finances even further and even greater struggles for homeowners and borrowers. The amount now being spent on mortgage repayments is said to be around one fifth higher than it was in the 1980s.
There have been many predictions made by analysts and industry experts with regards to the movement of the housing market, and many are expecting the slump to get worse and continue over the coming year as well as into next year.
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