First Time Buyers Spending More Of Their Income On Mortgage Interest
Higher Interest Rates and the high cost of homes in the UK is causing first time buyers to spend more of their income on mortgage interest payments. The current figure of 18.3% of income in March 2007 compares with 18% in February and only 16% in the same month last year.
A survey carried out for the Council Of Mortgage Lenders found that mortgage loan income multiples had also risen to 3.31 times income which is an increase from 3.3 times in February and up from 12 months ago when it was 3.15 in February 2006.
88% of first time buyers are choosing fixed rate mortgages. A sensible choice, it would seem, in a time of rising interest rates. This does demonstrate that the public are aware and making allowance for the rises in interest rates and it is significant that they are doing so.
Meanwhile another report from CreditExpert.co.uk says that the majority of people in Britain are comfortable with unsecured debts up to £15,000.
It seems slightly odd that people think in this way though it may, of course, have been guided by the questions asked. The amount of debt you have is relatively unimportant to your lifestyle. What really matters is the repayments.
Interest rates are on the rise and it is widely expected that there will be another 0.25% increase announced this week by the Bank Of England which will take the Bank Rate to 5.5% . This rate has not been seen since May 2001 and will be 1% more than the Bank Interest Rate just a year ago. This represents a rise of more than 20% in a year.
This has to be having a significant effect on people who have been steadily borrowing more and more over recent years on credit cards, personal loans and mortgages.
For those who bought their homes 5 years ago when the Bank Rate was 4% it will be something of a shock when their fixed rate period ends and they find their current mortgage interest based on a rate more than 33% higher. It surely must have a further effect on dampening house price rises.
