It takes London’s renters longer to pay off their annual rent than it takes the city’s homeowners to pay their annual mortgage, research suggests.
It takes London’s renters longer to pay off their annual rent than it takes the city’s homeowners to pay their annual mortgage, research suggests.
Based on the average annual mortgage repayment cost of £7,584 and the average net annual income of £26,023, Halifax has calculated that homeowners with a mortgage will have today earned enough on average to cover their mortgage payments for the rest of 2016.
The lender has therefore dubbed today “mortgage freedom day”.
Mortgage freedom day for Londoners doesn't arrive until 26 June but tenants in the city have to wait until 13 July to reach their so-called “rental freedom day”.
Regionally, the North was the first to achieve rental freedom day on 5 April just ahead of Yorkshire and the Humber on 9 April and the East Midlands on 13 April.
The UK’s mortgage freedom day is calculated as the date when the average new borrower – covering both first-time buyers and home movers taking out a mortgage in Q4 2015 – will have paid off their annual mortgage payments.
It is calculated on the basis that all their earnings from 1 January are devoted to mortgage payments until these annual payments have been paid in full.
Craig McKinlay, mortgage director at Halifax, said: “For most homeowners, mortgage payments are the biggest outgoing every month; knowing they’ve earned enough to pay off their mortgage for another year should be a reassuring thought.
“On the other hand, those who rent will need to work a further couple of weeks to have earned enough to cover their annual rental cost."
Jeremy Duncombe, director, Legal & General Mortgage Club, said: “In theory, Mortgage Freedom Day is the day that borrowers have earned enough to pay their mortgage for the rest of the year, but the truth is that very few people will be in this position, since mortgage repayments are normally just one of many monthly expenses.
“Nonetheless, Mortgage Freedom Day provides a good opportunity to think about how much of your monthly income is going towards your mortgage.
“At the moment, borrowers are enjoying historically low interest rates but it’s important to remember that mortgage rates are not directly linked to Base Rate, which means that circumstances could change at short notice.
“Anyone who is thinking about remortgaging should therefore speak to a broker as soon as possible, as the deals currently on offer will not last forever.”
