London homeowners are spending three quarters of their incomes on paying their mortgage following the fall out from Liz Truss’s mini Budget, an economist revealed today.
Robert Gardner, chief economist at Nationwide, said the staggering number is higher even than levels seen in the run-up to the financial crisis more than a decade ago.
His remarks came as the building society released new data showing the average house price in the UK fell by 1.4 per cent month on month in November, marking the biggest drop since June 2020.
But the pain caused by the former Prime Minister’s tax cutting plan, which sent mortgage rates spiralling in September, is being felt sharpest in London and the South East where higher property prices and larger mortgages are stretching affordability.
Mr Gardner told BBC Radio 4’s Today Programme: “If you look at the typical mortage payement there compared to average earnings in London that ratio is up at 75 per cent nearly. It was already elevated, it was at 50 per cent in the summer, but this 75 per cent...that’s well above the previous peak that we had before the financial crisis when it was at around 60 per cent so things are really really stretched in London and the south east.”
He said the national average had jumped to 45 per cent from 30 per cent in the summer.
Mr Gardner added: “A lot of this reflects the fallout after the mini budget and the big rise we saw in mortgage rates because that really did change affordability calculations for prospective buyers and made things a lot less affordable.”
November’s drop in the average UK house price followed a 0.9 per cent month-on-month fall in October.
Across Britain, annual house price growth slowed sharply to 4.4 per cent from 7.2 per cent annual growth recorded in October.
Although the surge in mortgage rates charged by lenders has eased off since the disastrous mini budget spooked financial markets in September, the Bank of England is expected to announce a further hike in the base rate later this month.
Last month its Monetary Policy Committee raised rates to three per cent with another 0.5 percentage point rise being predicted by the City.
Meanwhile new figures released today showed the UK’s manufacturing sector shrank for the fourth consecutive month amid weak new business and supply chain disruption.
The S&P Global/CIPS UK Manufacturing PMI scored 46.5 in November, edging up from a 46.2 reading in October.
