UK household wealth is estimated to have risen from around 300% of GDP in the 1980s to 840% of GDP, or £17.5 trillion, in 2021
London, Thanasis Gavos
The ever-increasing interest rates on loans in United Kingdom have caused the biggest decline in total UK household wealth as a proportion of it GDP since the end of World War II, according to a new report.
The well-known think tank Resolution Foundation finds in its report that the total wealth of households in the country has fallen by £2.1 trillion.
Now their property is estimated at approx 650% of GDP (based on the figures for the beginning of the year), i.e. it is almost 200% lower than the corresponding percentage at the beginning of 2021.
Resolution Foundation researcher Ian Mulhearn said that over the past four decades, citizens’ wealth had grown rapidly, “but the sharp rise in interest rates has ended that boom and brought about the biggest decline in wealth since the war.”
UK household wealth is estimated to have risen from around 300% of GDP in the 1980s to 840% of GDP, or £17.5 trillion, in 2021.
This large increase was attributed to higher house prices and higher pension values, which has also led to a large intergenerational wealth gap, with younger people left out of property ownership missing out.
THE significant decline that has been added to British wealth is now primarily due to falling property prices and high mortgage rates, but also to falling government and corporate bond prices. A result of lower bond prices is the fall in the value of pensions, which under normal circumstances are the biggest source of wealth for British households.
With regard to the continuous increases in interest rates of mortgage loansthe Resolution Foundation estimates that next year 1.7 million households will see their annual repayments increase by more than £3,000.
At the same time, a second survey by Citizens Advice, a debt consultancy organization for British citizens, finds that more and more UK homeowners are living with “negative budgets”.
This means that their income no longer covers their basic costs due to rapidly rising interest rates. In particular, the percentage of homeowners who are no longer able to cover all their expenses due to the cost of paying off the house has almost doubled in the last year.
Debt problem they also face more and more renters as landlords raise rents to meet rising interest rates.
Its prime lending rate Bank of England has been set at 5% after 13 consecutive hikes in an effort to control persistently high inflation and particularly so-called structural inflation that excludes volatile food and fuel prices.
At the same time, the average two-year fixed interest rate for a mortgage has been configured to 6.78% and the equivalent for five years to 6.3%.
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