Higher interest rates are causing UK first-time buyers to spend more of their income on mortgage interest payments, according to the Council of Mortgage Lenders.
Data from the regulated mortgage survey revealed that first-time buyers in March spent an average 18.3% of their income on mortgage interest payments, compared to 18% in February and 16% in the same month in 2006. The rise, which largely reflects increases over the last year in UK interest rates, means that the proportion of first-time buyers income consumed by mortgage payments is now the highest figure since 1991.
While the number of first-time buyers increased in March to 33,100 from 26,100 in February, their number was down by 8% on the same month last year. The survey revealed that 88% of first-time buyers, the highest proportion ever, chose a fixed-rate product, compared to 87% in the previous month. Fixed-rate mortgages continued to remain the most popular mortgage product in March, accounting for a record 78% of all loans, up from 75% in February.
Michael Coogan, CML director general, said: “With a rise in interest rates widely expected later this week, it is encouraging that those first-time buyers who are getting a foot on the property ladder are opting for fixed-rate products.
“Affordability constraints continue to be a barrier to home-ownership for many first-time buyers. Mortgage lenders are trying to help by offering innovative products where appropriate, but will want to ensure lending remains prudent.”