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Are you celebrating Mortgage Freedom Day?

Are you celebrating Mortgage Freedom Day?

Category: Mortgages

Updated: 10/04/2014
First Published: 10/04/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

According to Halifax, today is UK Mortgage Freedom Day – the day when new homeowners have earned enough to pay off the annual cost of their mortgage.

This is based on the average annual mortgage repayment of £6,954 and net annual income of approximately £25,600, with Halifax calculating that as of today, if homeowners had put all their income towards the mortgage, they'd have covered all their payments for the rest of 2014.

It seems that a combination of low mortgage rates and rising wages is paying off. Mortgage Freedom Day has come three days earlier this year thanks to average incomes rising by £2,153, and even though average mortgage repayments have also increased (by £357, perhaps down to the increased availability of high-LTV mortgages resulting in bigger loans and therefore bigger payments) it hasn't been enough to outweigh the pay rise.

"While monthly mortgage and rental costs account for the majority of many people's household budgets, Mortgage Freedom Day provides a different perspective on how much we spend on these costs over the course of a year," said Craig McKinlay, mortgage director at Halifax. "Our research shows that today, if people had put everything they'd earned since the start of the year towards their mortgage, the average homeowner would be mortgage-free for the remainder of the year, which is a reassuring thought."

So are you celebrating? Chances are that you won't have been in the position to plough all your earnings into your mortgage, but it's still an encouraging thought. Even if you've been able to overpay slightly each month thanks to rising wages you could still feel the benefit, helping to bring down the total cost of your mortgage and potentially the overall term, and if you're looking to remortgage or buy a property you can fix to a low rate to benefit from affordable repayments for as long as possible.

Sylvia Waycot, editor of Moneyfacts.co.uk, comments: "When you look at the size of the average mortgage the thought of ever being free of it seems like just a dream. But then aren't dreams the things we should make happen? Paying off your mortgage early needn't be about lump sums and doing without, just increasing the amount you pay each month can help and there is no better time to start than while interest rates are still historically low."

It's a great time for the mortgage market, but not everyone will be celebrating – particularly as further research has suggested that house prices could continue to rise for the foreseeable future.

The latest Residential Market Survey from the Royal Institute of Chartered Surveyors (Rics) has found that buyer enquiries rose in every part of the UK except Wales in March, but the level of properties coming onto the market declined for the third month running as the usual spring revival failed to materialise. Sales per surveyor, meanwhile, have climbed to a six-year high, being at the highest level seen since February 2008.

It's this imbalance that's underpinning the continued rise of house prices and is only applying further pressure, and given the survey recorded the 11th successive month of price increases – the longest period of consistent growth since the financial crisis – it's a trend that looks set to continue. In fact, contributing surveyors anticipate house price inflation to be around 6% per year over the next five years, with it only being a significant increase of new homes that could reverse the trend.

"It is a major concern that we are not seeing enough houses coming onto the market," said Rics chief economist Simon Rubinsohn. "For the market to operate effectively, we desperately need more homes in areas where people want to buy and want to live. Until this happens we're likely to see prices continue to increase and it is going to be ever harder for many first time buyers to conceive of ever owning their own home."

While it's encouraging that the housing recovery is spreading cross-country with improved finance availability meaning more people can get on the ladder, excessive price rises won't be so welcome. It's hoped that a resurgence of house building – or simply an influx of people wanting to move – will mean more properties become available and start to balance things out, and if mortgage rates don't rise too rapidly and loans don't increase too much we could all be celebrating Mortgage Freedom Day next year.

What Next?

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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