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29/03/2007 - Buying or renting? ...View

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29/03/2007 - Buying or renting?

In the recent strong housing market, and with an easy supply of credit, some lenders have offered young professionals mortgages at five times salary levels.

So what is the impact on such borrowers of the interest rate rises over the last year? Based on a typical standard mortgage rate the interest costs will have risen from 42% to 52% of post tax income. If you add in the capital repayments (36% of post tax income) and 'fixed' costs such as rates, electricity, food and travel to work, but no non-essentials, the borrowers’ monthly outgoings will have risen from 99% to 107% of post tax income!

In most cases borrowers have opted for interest only mortgages, and with no disposal income to put aside for capital repayments, you have to ask whether this is renting in all but name?

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