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Celebrate Mortgage Freedom Day - if you can afford to

borrower commitment concept
borrower commitment concept



Mortgage Freedom Day falls on 19 April this year, and marks the point in the year where everything we have earned up to this moment will have gone on making interest payments and paying off the mortgage. The bad news for homeowners is that it is a day later than last year - after mortgage repayments edged up. However, the worse news for renters is that Rent Freedom Day is still quite a way off.

According to calculations by the Halifax, the average annual mortgage bill is £7,584 a year. Given that the average annual income is £26,023, it means that by 19 April the average person has earned enough to cover their mortgage payments. Craig McKinlay, Mortgage Director at Halifax, commented: "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."

Mortgage Freedom Day actually hit earlier in many parts of Scotland - which saw eight of the ten earliest Mortgage Freedom Days. West Dunbartonshire was first (on 21 February), followed by Inverclyde and East Ayrshire (both 23rd February) and North Lanarkshire (25th February).

Elsewhere we haven't quite made it to Mortgage Freedom Day - as it hasn't yet hit in the South West (4 May), the South East (26 May) and London (26 June).

Rent headache

Rent Freedom Day, meanwhile, won't arrive until 5 May - a day later than last year - and in some parts of the country, tenants will be waiting months before they have earned enough to cover their rent.

Unsurprisingly, the last rent freedom day is in London - where tenants will pay everything they earn up until 13 July on rent. This is followed by the South West (22 May) and the South East (16 May).

At the other end of the spectrum, the North has already seen Rent Freedom Day come and go on 5 April, as has Yorkshire and the Humber (on 9th April), and the East Midlands (13th April).

However, renters can take some comfort from the fact that house prices are so high in parts of the UK that Mortgage Freedom Day kicks in long after the last Rent Freedom Day has passed. Homeowners in South Bucks have to wait until the autumn (12th September), while those in Hammersmith and Fulham wait until 21st August, in Brent in North West London they're waiting for 19th August, and in Ealing they're holding off for 8th August.

Of course, this is an artificial measure, because the average salaries in many parts of the South East are way above the UK average - while in parts of the country with rock bottom house prices and rents, incomes tend to be far lower. However, it's a reminder of how heavy the burden of paying rent or covering the mortgage is.

Bad news for everyone

These dates are also likely to drift later in the year in 2017 and 2018. Rental prices have been increasing: between 2014 and 2015 they were up 18% in Brighton and Bristol, 16% in Edinburgh and Newcastle, and 11% in London and Liverpool.

In the years to come, as George Osborne makes life more expensive for landlords, these costs are going to end up being passed on through even higher monthly charges.

Meanwhile, mortgage holders face the prospect of rising rates over the course of the next year or two, which will push Mortgage Freedom Day back still further. In South Buckinghamshire, where it is currently 12 September, homeowners face the prospect of spending three quarters of the national average income on their mortgage payments.

So celebrate Mortgage Freedom Day - and try not to think about when you'll next have the chance to do so.

Council of Mortgage Lenders - Buy to let market recovering
Council of Mortgage Lenders - Buy to let market recovering