Mortgage debt 'more of a burden'

House price inflation has outstripped the rise in earnings

Keeping up with mortgage repayments swallows up more of salaries today than in 1996, research suggests.

Moneyfacts, the financial information company, said that on average mortgage payments account for 24% of people's pre-tax salary today.

In 1996, just 16.5% of households' salaries went on mortgage repayments.

The ending of tax relief on mortgage interest and large mortgage debt were cited as reasons for more of salaries being swallowed up.

Worrying development

When you factor in additional increased expenses such as higher council tax and utility bills, it is no surprise that the UK is now faced with the current personal finance debt Andrew Hagger, Moneyfacts

First-time property buyers, in particular, are finding a far greater percentage of their salary going on mortgage debt than was the case 10 years ago.

Mortgage debt accounts for nearly 27% of first-time buyers' salary compared to 18% in 1996.

Between 1996 and 2006 the average income for first-time buyers has nearly doubled from £17,308 to £34,216.

Nevertheless, this lags behind rising house prices. In the past decade, Moneyfacts said that average house prices have soared from £64,692 to £181,122.

In essence, what has happened is that while incomes have risen they have not kept up with housing costs, hence a greater proportion of salaries are going on meeting mortgage repayments.

Andrew Hagger, Moneyfacts spokesman, said that this was a worrying development.

"This statistic looks gloomy enough in its own right," he said.

"When you factor in additional increased expenses such as higher council tax and utility bills, it is no surprise that the UK is now faced with the current personal finance debt," Mr Hagger said.

Debt evidence

Recent months have seen a blizzard of data outlining the scale of UK personal debt.

Personal bankruptcies are reaching record highs and charity Citizens Advice has warned that 770,000 people have missed one or more mortgage repayment in the past year.

The Bank of England's Monetary Policy Committee meets on Wednesday to decide the next move in UK interest rates.

If the committee decides to raise rates it could pile more financial pressure on mortgage holders.