CML warns of affordability crunch

08 May 2007
Analysts almost uniformly anticipate a rise in interest rates when the Bank of England Monetary Policy Committee meets later this week.

But such a move will only make things worse for the first-time buyers already struggling with affordability dilemmas, the Council of Mortgage Lenders (CML) has warned.

First-time buyers are now spending more of their income than ever on mortgage repayments, the CML found, shelling out 18.3 per cent of earnings in March compared to 18 per cent in February.

As a proportion of first-time buyers' income, mortgage payments are now more expensive than at any time since 1991.

Happily, many first-time buyers are getting wise to ways to deaden the impact rising interest rates can have on their savings by opting for a fixed-rate mortgage, the CML reported.

The highest proportion of first-timers ever recorded chose a fixed-rate product in March, making it firmly the most popular mortgage type.

But a base rate rise of just 0.25 per cent would push the mortgage repayments of the average homeowner with a 25-year £80,000 mortgage up by £11.87 per month, Moneyfacts.co.uk calculated recently.

Find out more with our guide for first-time buyers

track© Adfero Ltd