Households paying 22% of earnings on mortgage repayments

Households paying

The average household is forking out £1,139 per month when repaying their mortgage

The average household is now paying 22% of its monthly earnings on the cost of repaying their mortgage, up from 16% since the start of this year alone, the latest research by Octane Capital has shown.

The specialist property lender analysed the current cost of repaying a mortgage across each area of the British property market, before comparing this to the average annual gross earnings of a household in each area based on two incomes per household, to see just how much of the household income a mortgage now requires, as well as how this cost has changed since the start of the year.

With the average adult earning £2,635 per month, the average British household benefitting from two incomes is taking home a gross monthly income of £5,270.

Based on borrowing at the latest mortgage rates and with 75% loan to value mortgage on the current average house price of £295,747, the average household is forking out £1,139 per month when repaying their mortgage. This accounts for 22% of a household’s gross monthly income.

This proportion of income required has also increased by 6% so far in 2022.

London is predictably the least affordable region when it comes to mortgage market affordability. The average household across the capital is currently spending 30% of their gross monthly to cover their monthly mortgage repayments, followed by the South West (27%), and South East (26%).

The current outlook for the nation’s homebuyers and owners is becoming increasingly difficult and it really demonstrates just how high the cost of homeownership has climbed when nearly a quarter of household income is swallowed up by mortgage repayments, Jonathan Samuels, chief executive at Octane Capital, commented.

Samuels said: What’s more, this proportion of income required to cover our mortgage repayments has been climbing steadily since the start of the year and is likely to continue doing so, as mortgage rates are predicted to increase to as high as 6%.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Invest for Property. The information provided on Invest for Property is intended for informational purposes only. Invest for Property is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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