First-time mortgage repayments hit 16-year high
Homeowners are spending more of their salary on mortgages for the first time since 1991 as the market continues to weaken
Mortgage repayments reached their highest levels since 1991 in October, leaving first-time buyers paying out more of their salary to get on the property ladder.
The Council for Mortgage Lenders (CML) said today that first-time buyers paid 20.6 per cent of their income on home loans during October, compared to 20.4 per cent in September.
Payments also increased for homeowners who moved house, up from 17.5 per cent of average income in September to 17.6 per cent in October.
The CML said that first-time buyers typically borrowed 3.36 times their income while the average home mover borrowed 3.02 per cent their income. (AtW's comment: surely this can't be that low? )
This month, the Bank of England reduced the UK interest rate by a quarter point to 5.5 per cent, but in 1991 the borrowing cost reached 10.5 per cent.
According to the CML, the average mortgage for first-time buyers in 1991 was £37,000 on income of £16,107. In 2007, a typical mortgage was £117,000 on a £35,400 salary.
While lending volumes rose by 9 per cent to £33.5 billion during October compared to the previous month, the number of mortgage approvals fell by 16.5 per cent in the year to October, although it rose in October to 82,900, from 80,400 the month before.
Michael Coogan, the director general of the CML said: "October is the last month we expect lending volumes to be higher than a year ago as lenders and borrowers will behave more cautiously in an uncertain and slowing market environment."
Levels of new fixed rate loans fell from 72 per cent in September to 68 per cent in October. Fixed rate loans have have been popular throughout 2007 with levels of consistency at or above 70 per cent.
The CML added that the move towards variable rate loans was likely in the coming months in anticipation of further interest rate cuts, adding: "The Bank of England’s rate reduction of 0.25 per cent will provide some relief to borrowers in coming months."
Homeowners are spending more of their salary on mortgages for the first time since 1991 as the market continues to weaken
Mortgage repayments reached their highest levels since 1991 in October, leaving first-time buyers paying out more of their salary to get on the property ladder.
The Council for Mortgage Lenders (CML) said today that first-time buyers paid 20.6 per cent of their income on home loans during October, compared to 20.4 per cent in September.
Payments also increased for homeowners who moved house, up from 17.5 per cent of average income in September to 17.6 per cent in October.
The CML said that first-time buyers typically borrowed 3.36 times their income while the average home mover borrowed 3.02 per cent their income. (AtW's comment: surely this can't be that low? )
This month, the Bank of England reduced the UK interest rate by a quarter point to 5.5 per cent, but in 1991 the borrowing cost reached 10.5 per cent.
According to the CML, the average mortgage for first-time buyers in 1991 was £37,000 on income of £16,107. In 2007, a typical mortgage was £117,000 on a £35,400 salary.
While lending volumes rose by 9 per cent to £33.5 billion during October compared to the previous month, the number of mortgage approvals fell by 16.5 per cent in the year to October, although it rose in October to 82,900, from 80,400 the month before.
Michael Coogan, the director general of the CML said: "October is the last month we expect lending volumes to be higher than a year ago as lenders and borrowers will behave more cautiously in an uncertain and slowing market environment."
Levels of new fixed rate loans fell from 72 per cent in September to 68 per cent in October. Fixed rate loans have have been popular throughout 2007 with levels of consistency at or above 70 per cent.
The CML added that the move towards variable rate loans was likely in the coming months in anticipation of further interest rate cuts, adding: "The Bank of England’s rate reduction of 0.25 per cent will provide some relief to borrowers in coming months."
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