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HBOS rejects repeat of 1990 housing crash

HBOS chief economist Martin Ellis believes a repeat of the 1990s housing crash is extremely unlikely in the foreseeable future.

Speaking at the HBOS mortgage writers’ dinner last week, Ellis said the ratio of mortgage repayments to incomes is still below its 1990 level at 30 per cent compared with 36 per cent.

He said: “Yes, it has risen over the last couple of years but we are still seeing the mortgage payment to income ratio at below the level we saw in 1990. I think it is important that there is a difference.”

Ellis pointed out that homebuyers have been putting down much bigger deposits compared with previous cycles. He said 82 per cent of borrowers put down a deposit of more than 10 per cent last year while 44 per cent of borrowers in 1990 put down a deposit of less than 10 per cent.

Ellis also dismissed recent concerns over payment shock. He said: “A lot of the figures being bandied around about how big that payment shock is going to be are misleading.”

He said HBOS’s view is that a borrower taking out an average-sized mortgage a couple of years ago will be facing a monthly increase of between £65 and £90 when their current deals expire.

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