Recession fear re-emphasises the importance of mortgage protection advice
House price to income ratios are mirroring those seen in the late 1980s, suggesting another UK recession is on its way, according to an actuarial report by mortgage payment protection provider, Pinnacle Insurance.
The report says house prices and average income figures are following the same pattern as they did prior to the last recession, and consequently there is a heightened risk borrowers may be unable to meet mortgage repayments, unless they have some form of mortgage protection in place.
Tony Claytor, new product director at Pinnacle, said the report highlighted the need for borrowers to take out mortgage payment protection insurance (MPPI).
'This report by our actuarial department indicates the UK economy is moving into recession. Job losses are no longer a prediction ' they are a fact. Redundancy is occurring across the UK industry and commerce ' the engineering sector is predicting 300,000 job losses in the next 15 months alone. With the average mortgage standing at £500 per month, hard-won savings may disappear if protection is not in place,' he said.
The report states that while house price inflation is increasing, mortgage rates have fallen, encouraging people to borrow more. Coupled with the fact that average house prices have risen by 60% since 1996, twice as fast as earnings, the report concludes that the market is close to the unsustainable peak seen before the last recession.
Sarah Anderson, author of the report, said: 'Many of the main recessionary indicators appear to be following the same trends as previous to the last recession and this is proof we will almost certainly enter recession in the near future. There was a steep increase in house prices leading up to the last recession. The rate at which house prices are accelerating is similar to that of the late 1980s.'
