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17 September 2007
According to a report from the Council of Mortgage Lenders, many first time buyers are now having to use a large proportion of their income to cover the cost of their mortgage loan, as they struggle to get onto the property ladder. Figures show that many first time buyers are now borrowing around 3.39 times their income, which puts a real squeeze on their finances when it comes to repaying the loan, particularly in light of the series of interest rate rises that have been applied to the base rate over the past year by the Bank of England.
The Council of Mortgage Lenders also claim that nearly twenty percent of the income of a typical first time buyer is spent on repaying the interest on these loans, which reflects the highest proportion in around sixteen years. The CML also confirmed that the housing market is slowing down. One official stated: "Both market conditions and sentiment are coming off the boil and affordability is ever more stretched, but consumers should not expect any immediate easing in the financial pressures they face."
Rising interest rates and soaring house prices have taken their toll on the number and level of mortgage loans made to first time buyers, as consumer confidence and affordability has decreased, stated the CML. Both the value and the number of mortgage loans made to first time buyers have been falling according to CML figures.
Predicted decreases in property values in the UK could see a rise in interest from first time buyers, as many expect house prices to fall over the coming months. A report from Rightmove claims that in August the asking price for many properties in the UK fell by an average of £6000, and this could help to increase the number of first time buyers that feel that they can afford to get onto the property ladder and take on a mortgage.
Fixed rates have become particularly popular with those first time buyers that are committing to a mortgage, with nearly eighty percent of new mortgage loans being fixed for a specified term.
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