Hackney Gazette – Sinking with the Mortgage

Home owners in South Hackney and Shoreditch are spending up to a third their wages on mortgage repayments.

The area has been named as the worst place in the country for property owners expecting to part with more of their hard-earned cash to pay their mortgage.

Andy Gray, head of mortgages for the Woolwich, said that the top 50 least affordable areas are more likely to be up-and-coming neighbourhoods rather than ones with high property prices.

He explained that in certain areas, including South Hackney and Shoreditch, many borrowers were spending a higher proportion of earnings on repayments.

“Places like Hackney tend to attract young professionals who will borrow as much as they can to get a property in the next up-and-coming area,” said Mr Gray.

“They are hoping hat property prices will increase quickly as the area gentrifies and are also confident that as young professionals their earnings will rise quickly to drive down their mortgage payments as a percentage of income.”

The price of an average three-bedroom house in South Hackney and Shoreditch is now more than £300,000, according to estate agents, Bunch and Duke, in Mare Street, Hackney.

Prices have risen rapidly over the past three years and buyers are expected to pay out more of their income on a mortgage here than anywhere else.

Property owners paid 26.5 of their income on mortgage repayments in 2002. That figure has now increased to 32.8 percent.

South Hackney and Shoreditch is followed closely by Brent East, Vauxhaull, Poplar and Caning Town and Brent South as areas in which buyers spend most of their incomes on mortgage repayments.

Gazette Editorial

Having a mortgage can be a financial millstone around your neck, so a study showing what percentage of their salary home owners spend on repayments may make folk think twice about getting on the property ladder in Hackney. The average amount of net wages Londoners use to repay their home loans is 23 per cent, but in popular areas like Hackney South and Shoreditch the proportion of earnings which go towards repayments, according to the Woolwich, is as much as 33 per cent or a third! That’s because many buyers attracted to the area are young professionals who borrow as much as they can, gambling that property prices will increase quickly and their earnings will rise at the same rate to drive down their percentage of income spent on repayments.

As a result up-and-coming areas like South Hackney are among the least affordable in the capital because many buyers are not among the top earners.

If home owners in the south of the borough are paying up to a third of their earnings in mortgage repayments, that means they have less in their pockets to spend on the high street, and that can only be bad news for the local economy.