Raised debt for overvalued property
House prices continue to rise and people live with the stress of debt everyday, due to mortgage repayments on properties that are overvalued by at least 20%.
A typical example can be found in an estates agent’s window, where a typical house currently valued at £211,000 is currently overpriced by at least £40,000.
In England house prices have escalated by 210% over the past decade, whilst incomes have only risen by 53%. As a result, incomes simply cannot keep up with the mortage payments.
This increase in debt has made Britain one of the most susceptible countries in the world, to rising interest rates.
In relation to sixteen other countries, the UK ranks third in line to high interest rates, with New Zealand in first place and Denmark a close second.
New Zealand hits the number one spot where consumers have accumulated large amounts of debt in a country where the base rate is over 8%.
Countries such as Germany, Italy and Japan ranked at the lower end of the scale. This shows that they could manage financially if interest rates rose as they keep their spending levels in line with their wages.
If the base rate rises above 6 per cent as anticipated, there will be an even higher level of debt resulting in defaults, bankruptcy and house repossessions in the UK.
Properties could only fall in line with wages if the property market crashed or house figures remained static for many years.
Savings News posted on 20/08/2007 09:38:14
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