According to the Council of Mortgage Lenders (CML), interest rate rises have pushed up mortgage interest payments for first-time buyers to their highest levels since 1992.

First time buyers in April were paying 18.7% of their income on mortgage interest, up from 18.3% in March 2007 and 16.3% in April 2006.

Despite the recent decision by the Bank of England to hold interest rates at 5.5%, borrowers will see further increases in the proportion of income they spend on mortgage interest payments once May’s interest rate rise starts to be reflected in CML’s data.

In addition, increasing numbers of first-time buyers are paying stamp duty, which is up to 58% from 51% in April 2006.

Michael Coogan, CML director general, 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. 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.”
Olivier Gilmartin, Royal Institute of Chartered Surveyors’ senior economist, added: “ The price of fixed rate mortgages has risen consistently in 2007 and is set to rise further as interest rate rises and lingering inflation concerns raise longer dated borrowing costs. With affordability the worst in over a decade and some homeowners fearing the end of current fixed rate arrangements, holidays at home may be all the rage this summer.”