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First-time buyers stretched by rate hikes

First-time buyers are being stretched to new limits, negotiating higher asking prices and newly high interest rates.

The latest figures from the Council of Mortgage Lenders (CML) show that income multiples have reached record highs.

In November, new buyers were forced to borrow 3.29 times their salary on average, up from 3.27 in October and 3.08 in November 2005.

CML director general Michael Coogan said: "Month on month we see affordability constraints becoming more pronounced for first-time buyers and last week's interest rate rise will increase these pressures.

At the same time, loan repayments have become more demanding, following three interest rate rises from the Bank of England, as of January 2007.

The CML reports that the average first-time buyer borrowed £113,877 in November and will have seen their monthly repayments increased by £17 in light of recent rate hikes.

However, Mr Coogan noted: "But, first-time buyers are clearly still keen to get on to the property ladder despite the growing financial hurdles.

"It is essential that anyone wanting to buy their first home should look carefully at their finances and take a realistic view as to whether they can afford the costs of home-ownership if rates continue to rise."

Despite strained affordability, the number of first-time buyers continues to increase, with five per cent more mortgages extended in November. First-time buyers took out 37,000 loans, compared to 35,300 in October.

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16/01/2007 15:42:36

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