Mortgage debts increasing

August 5, 2016 by Brendan O'Neill

Borrowers

New data has revealed that home owners are borrowing far more than they were five years ago.

In 2011, a typical borrower would take on a loan equivalent to three times their salary, according to research by the Council of Mortgage Lenders. Due to increasing house prices, the levels of borrowing are now far higher, with homeowners borrowing 3.39 times their earnings.

An individual with an average salary of £26,000 is borrowing £10,140 more than they did five years ago.

The study reveals that back in 2011, an average mortgage would have been around £78,000, whereas today, that figure has increased to £88,140. Five years ago, a worker earning a salary of £50,000 would have borrowed an average amount of £150,000, but now they would be borrowing an extra £19,500 on top of that sum.

According to experts, this trend is an indication of the rising debt in Britain. As many households take on other loans and spend on credit cards, adding to their overall borrowing total, the problem is getting worse. According to figures from the Bank of England, for every £1 that a household has in income, they have £1.30 of debt.

The cheaper mortgages being introduced by lenders could mean that a borrower could pay off more of their mortgage debt, lowering the overall total owed. Before taking on a mortgage, it is advisable to speak to a mortgage adviser, as they are CeMAP qualified and can help you calculate overall levels of debt, which may affect the outcome of affordability checks.