First-time buyers spending half their salary on mortgage payments

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Monday 11th June 2007

First-time buyers have seen their mortgage repayments rocket to a level where they are now spending 50 per cent of their take home salary on their monthly payments, according to the latest reports.

Figures from the Nationwide Building Society have shown that mortgage repayments now account for more than they have since 1989, when the average mortgage repayment for a first-time buyer accounted for approximately 56 per cent of their take home salary, the Guardian reports.

"Affordability has clearly deteriorated," said Nationwides chief economist, Fionnuala Earley, according to the newspaper.

"Some parts of the country have felt the pinch more than others. Northern Ireland saw the worst deterioration in affordability and is now the most expensive place in the UK for first-time buyers after London."

Homeowners who took advantage of the particularly low interest rates of two years ago could soon be feeling the cost of the rate rises seen in the past six months when their promotional rate deals end. It is estimated that £100 a month could be added to the repayments of such first-time buyers by the Council of Mortgage Lenders (CML).

The trend of increasing payments is one that has been recognised by a number of those in the financial services sector.

In May, the CML revealed that on average the percentage of salary that payments equated to for first-time buyers was lower than Nationwides estimation, but that it was still on the increase.

The CML suggested that the 18.3 per cent of salary spent on mortgage repayments was a slight increase on Februarys 18 per cent, which was itself an increase on the 16 per cent average seen in January.

Meanwhile, first-time buyer resource Firstrung has suggested that when other household expenditure is added to mortgage repayments, first-time buyers on an average UK salary are spending 100 per cent of their monthly income on such bills.

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