Bad News From The Property Ladder
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The wave of house repossessions that has been observed in America over the past months is beginning to make itself felt on this side of the Atlantic.
In 2008 alone, the Royal Institution of Chartered Surveyors (RICS) said 45,000 Briton families would lose their home because of the high cost of paying mortgages. This boils down to 123 homes being repossessed every day.
The RICS estimate tallied with a similar projection by the Council of Mortgage Lenders. Meanwhile, the Financial Services Authority raised the alarm on 840,000 mortgages whose holders are deemed risky.
Acquiring a home in the U.K. was easiest in 1996. If the cost to buy a house now is compared to 12 years ago, the RICS said the bill has gone up by 351 percent. A British couple who jointly earn $52,995 (26,595 pound) a year after taxes, must save 104 percent of their annual take-home pay or $55,253 (27,729 pound) to afford the deposit, fee and duties if they were to purchase a typical house this year.
RICS blamed the spiraling cost of owning a house to the slight reduction in the loan-to-value ratios lenders were willing to extend to first-time buyers, the heavy stamp duty and other costs that go with buying a residence.
Meanwhile, a survey by personal finance website MoneySupermarket.com reflected the general gloomy atmosphere pervading the British home mortgage market. Three percent of the respondents thought they would be declared bankrupt this year, while 6 percent fear their homes will be repossessed in 2008.
Given the survey size, the 3 percent is equivalent to 1.35 million Britons who think they will be declared bankrupt, and the 6 percent represents 2.7 million adults who fear losing their homes. The widespread pessimism, though, is far greater than what RICS and the CML project.
Tim Moss, head of loans at MoneySupermarket, explained, “People don’t know when the credit crunch is going to stop. Many people are starting to feel the pinch, with stock markets falling, their utility bills rising and their disposable income going down, and they may never have experienced that in the past.”
RICS senior economist David Stubbs added first-time homeowners will find it harder this year to acquire their own property, and the signs are that the situation will not improve in the short term.
