by Mark Johnston
Home Buyers Should Stop Spending On Non-Essentials!
Experts have recently suggested that young people are slightly losing the concept that you make sacrifices to get on the ladder. They want to go to university, they want to travel, they want to eat out frequently and they want to buy their first flat.
Stewart Baseley, executive chairman of the Home Builders’ Federation (HBF), said “Unlike previous generations that took home ownership for granted, today’s generation have a mountain to climb if they wish to own their own home.”
Recent analysis revealed that young people must save for more than a decade before they can afford to buy their first home.
However, it appears that it is not only first time buyers that are struggling financially.
Last years Financial Stability Report showed almost a fifth of mortgage holders had less than £200 of disposable income a month.
According to a major report into the health of the nation’s finances millions of Britons are struggling with money because the economic downturn has encouraged a ‘live for now’ culture.
More than half of UK adults said they were struggling with their finances, Government backed body the Money Advice Service (MAS) found.
Many home owners have been forced to cut back on spending and did not enjoy many of the same luxuries as the generation that preceded them.
New Which?, a consumer campaigning charity, analysis of official data shows that on average each household has spent £3,150 less a year, over £12,000 in total, since the beginning of the financial crisis.
Richard Lloyd, executive director at Which?, said: ‘The squeeze on incomes and collapse in consumer confidence has led households to slash their spending during the financial crisis, with a devastating impact on the wider economy. The longer the squeeze goes on, the longer this spending setback will continue.”
The UK has never before come out of recession without an increase in consumer spending, so it is critical that the Chancellor puts consumers at the heart of his plans for a return to growth.
Interest rates have been at a record low of 0.5 per cent since March 2009 after the Bank of England slashed the cost of borrowing to prevent an even bigger recession at the height of the credit crisis.
But, the Bank of England has recently warned that just a small rise in rates from the current 0.5 to 1.5 per cent could cause significant levels of “borrower distress”.
A one per cent increase in interest rates would push repayments on a £100,000 mortgage up by more than £60 a month.
Ray Boulger of mortgage advisor John Charcol added: “The problem for me is not how much rates will go up by but how quickly. If they go up a long way too quickly people will really feel it.
Therefore millions of homeowners have been warned they will have to work longer hours, or cut spending, to be able to pay the mortgage when interest rates start to rise.
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