7IM Short Thoughts: Mortgage envy
There have been some great imports from the US over the years - think of your favourite TV shows, movies and music - but one thing that hasn't made it to the UK just yet is the luxury of budgeting long term when it comes to your mortgage.
Chris Justham looks into the detail in the latest Short Thoughts.
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Interest rates are going up around the world, and don't we all just know it. Affects us all in the pocket, and that is largely because mortgages are our biggest outgoing. And as interest rates go up, they become more expensive. But do they, over in the US? Well, it's really interesting because look at this chart. You can see over in the US the majority of people, the vast majority, in fact, over 80%, have their mortgages fixed for more than five years.
Compare that with over here in the UK and only 3% of people have the same luxury. And I call it a luxury, by the way, only because you have the ability to budget for an extended period of time and know exactly what your outgoings are going to be. That means, you know what your discretionary expenditure can be, and what you can afford. Not just this year, or in two or three years, but in five, ten or fifteen years. Now, what I also read from this chart is that 97% of people over in the UK aren’t able to do the same thing.
So for all of the things that have been imported from the US that have affected my life in a positive way, I think about music and I think about TV and everything else. My mortgage is now coming up in two month's time and if I could have imported the ability to budget for an extended period of time and know that over a 30-year time period, what I was going to owe, I think that would have been a lot more beneficial for me.
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