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Mortgages

Volume 958: debated on Monday 20 November 1978

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asked the Secretary of State for the Environment what was the monthly mortgage payment payable by an owner-occupier purchasing a £10,000 house in February 1974 with a 90 per cent. mortgage; what would be the repayment for a purchaser buying the same house at present; and what proportion of average earnings the mortgage payments would represent in each case.

Monthly repayments on a new 25-year repayment mortgage of £9,000 in February 1974 would have been £8910 gross or £64.35 net of tax at the basic rate of 30 per cent. and at a mortgage interest rate of 11 per cent. House prices have risen, on average, by about 50 per cent. since that time and a house purchased for £10,000 in February 1974 might now cost around £15,000. Repayments on a 90 per cent. mortgage—that is, £13,500—would be £141–08 gross or £9745 net of tax at 33 per cent. and at a mortgage interest rate of 11·75 per cent. The increase in the monthly mortgage repayment would therefore have been about 50 per cent. net or about 60 per cent. gross; between February 1974 and September 1978 the index of average earnings in Great Britain increased by 116 per cent.It is unlikely that a purchaser on average earnings would have obtained a mortgage of these sizes. A typical first-time purchaser who took out an average advance in 1974 could have expected gross monthly mortgage repayments to be about 30 per cent. of his net income; the equivalent proportion is now about 27 per cent.