More on the professional poor
The Telegraph today covers a new study by the Centre for Policy Studies that claims median household incomes have fallen by £1,300 over the past four years. This is a more credible survey than the uSwitch one which was the Telegraph's background to the 'Coping Classes' article, and in fact it completely contradicts the Telegraph's interpretation of that survey, as it shows (using the same method of calculation) that average household disposable income has risen from £12,603/year in 1997 to £15,231/year in 2007. Using an average, not median, and not taking off costs (just taxes) they have it rising from £22,578/year to £34,751/year.The claim that disposable income has fallen since 2002 essentially rests on three rising costs, as earnings have risen from £23,378/year to £27,557/year. These are taxes (including council tax), which they estimate have risen by about £1,700/year, other household expensives which they have down as rising by about £700/year, and finally mortgage interest payments, up by a whopping £3,800/year. The argument is that on an average £125k mortgage, payments on interest (they correctly do not look at repayments) will have risen.
But how do they arrive the average mortgage figure? Table Four gives average mortgage debt per household as being £46,671, a rather different proposition. The average mortgage advance in 2007 was around £125,000, but that's also not the same as an average mortgage. Thus it should be noted that their figure is the average mortgage of owner-occupiers who have mortgages, which is about 40% of total housing. This will underestimate the impact on first-time buyers, and overestimate it for those who have owned housing for longer.
The level of mortgage debt has risen because of the tremendous rise in house prices. The survey sees this as all cost, and no gain. The gain comes to those who either are in recepit of inheritances or who have sold their houses and rented. This should really be included in the figures, and the survey clearly acknowledged to be of a sub-set of the population.
posted by Matthew @ 2/04/2008 05:03:00 PM
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