News from the Residential Property Investor, the bi-monthly magazine for RLA members other artilces from the November / December 2002 issue RPI news archive

Household debt management - November / December 2002

According to the latest house price surveys from mortgage providers Halifax and Nationwide, the average price paid for a home in the UK is more than £110,000 ­ a fifth higher than only 12 months earlier.

Although the Halifax numbers suggest house price inflation may be beginning to ease (a view not supported by the Nationwide's results), the hike in property values has left buyers with larger mortgages to repay; household debt is now at an all-time high ­ both in money terms and as a proportion of income. With a stalling economy and uncertain political background, the level of consumer debt is a matter of concern.

But, the Centre for Economic and Business Research claims, we are still a long way from a debt crisis.

Although the average household's debt has risen to £32,815, the value of its assets has grown too. Outstanding debts represent 14·9 per cent of average household wealth. With recent stock market turbulence affecting the value of pensions and investments, this ratio has risen from its low of 13·3 per cent at the end of 1999 ­ but remains well below ten levels the years ago. Then, the debt-to-wealth ratio soared ­ reaching 17·8 per cent in the second quarter of 1992.

Secondly, with a combination of sustained low rates of interest and a competitive market, debt is as affordable now as it has ever been.

The average household currently pays £2,239 in interest payments to service its debts each year. This is equivalent to 6·8 per cent of gross income.

Back in 1990, interest payments accounted for 11·2 per cent of gross income.
 

other artilces from the November / December 2002 issue

• Making representations
• Tenancy gains for unmarried couples
• Queen's speech
• In brief
• Inheritance tax clamp down
• House price inflation lower
• Housing benefit pilots
• Household debt management