Higher interest rates are causing first-time buyers to spend more of their income on mortgage interest payments, according to the CML. 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 last year. The rise, which largely reflects increases in interest rates, means that the proportion of first-time buyers' income consumed by mortgage payments is the highest figure since 1991.
The survey also found that first-time buyer income multiples have edged up over the past year to 3.31 times the average first-time buyer income - up from 3.30 in February and 3.15 times in the same month in 2006.
The increasing costs of home-ownership are clearly deterring many potential first-time buyers from getting on to the property ladder. 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.
But the data shows that first-time buyers are seeking to protect themselves from future increases in interest rates. 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.
Commenting on today's data, CML director general Michael Coogan 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."
NOTES TO EDITORS
1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.6 million mortgages in the UK, with loans worth over £1 trillion.
2.The next RMS press release will be published on Tuesday 12 June.
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