First-time buyers 'stretching finances'

Posted: 15 Sep 2006 11:35:07 GMT

First-time buyers in Britain are being forced to stretch their finances even further in order to get a foot on the property ladder.

First-time buyers in Britain are being forced to stretch their finances even further in order to get a foot on the property ladder.

New figures from the Council of Mortgage Lenders (CML) show that income multiples for first-time buyers soared to a record level of 3.24 times the average income, up from 3.21 times in June and 3.06 times for July 2005.

The council reports that mortgage interest payments for first-time buyers rose as a percentage of income for the fourth month in a row in July this year to 16.7 per cent.

The CML predicts that both income multiples and repayments as a proportion of income could rise further over the coming months following the decision by the Bank of England's Monetary Policy Committee in August to raise interest rates by a quarter point to 4.75 per cent.

The average mortgage for first-time buyers is now £110,500 and the number of people taking out fixed-rate loans dipped in July as a result of higher pricing.

Michael Coogan, CML director general, commented: "First-time buyers are continuing to find ways of getting a toehold on the property ladder, showing just how popular home-ownership is to many young people. But higher income multiples, coupled with higher interest payments as a proportion of income, suggests that they are continuing to stretch themselves to do so."

The council advises first-time buyers and borrowers to examine their finances carefully to ensure that their debts are manageable, particularly as a further interest rate rise is being forecast for later in the year.

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