House prices increase first buyers’ burden

First time buyers have to take on increasingly demanding financial burdens to get a foot on the property ladder.

Figures released by the Council of Mortgage Lenders show that first time buyers are borrowing an average of 3.3 times their annual income, as house prices continue to rise.

First time buyers also have to pay stamp duty in larger numbers, due to rising house prices.

In April, 58% paid the initial 1% rate of stamp duty, charged on homes worth more than £125,000. This compared to 51% the previous year.

Michael Coogan, director general of the Council of Mortgage Lenders, said: "Month on month we see affordability constraints for first-time buyers worsening. And with the impact of May’s interest rate rise still to be felt, many borrowers face higher costs in the coming months."

With interest rates rising to 5.5% in the past year, fixed-rate mortgages have become increasingly popular, accounting for 78% of all new mortgages in April.

However, the Council of Mortgage Lenders warned home owners to prepare for higher repayments if their current deals expire in the few years.

Mr. Coogan said: "The vast majority of borrowers will be able to absorb higher mortgage payments. But with two million fixed-rate loans coming to an end over the next year and a half, many borrowers should anticipate that their mortgage costs are likely to rise, and should be planning ahead."

« back to development finance news