‘Decrease Recorded In First Time Buyer Numbers’

In research carried out by the Council of Mortgage Lenders (CML), the number of first-time buyers getting on the property ladder was revealed to have fallen.

Over the course of June, some 35,600 loans were issued to those looking to make their initial steps into the housing market - down from the 39,800 recorded in the same month last year. Although the most recent CML figures indicated a rise from the 34,600 noted during May, the June statistics were the lowest recorded for the month since 2004. Meanwhile, the amount of loans issued to existing homeowners decreased to 66,300 - a shortfall of about 4,000 from the corresponding month in 2006.

Bernard Clarke, spokesperson for the council, told the Guardian: “We’ve had a long period, a decade almost, in which house prices have been rising much more quickly than incomes. This has been offset to some degree by low borrowing costs, but with rising interest rates the problems for first-time buyers have become more pronounced.”

Research also showed that five interest rate rises by the Bank of England’s monetary policy committee over the last 12 months were “continuing to affect the market” as affordability pressures across homeowners’ finances increase. The typical first-time buyer was borrowing at 3.37 times their annual pay over June - and with the statistic up slightly from May’s figures this was revealed to be a record ratio. In addition the study showed that an increasing amount of first-time buyers’ salaries is going towards servicing interest on mortgages, as the payments currently make up 19.3 per cent of their income - a rise from the 16.5 per cent noted in June 2006.

Findings from the company also showed that an ever-rising number of prospective first-time buyers are looking to fix their monthly secured loan repayments. An estimated 90 per cent of such consumers opted for a fixed-rate mortgage during the month - a rise of one percentage point from May and up from 83 per cent recorded from June 2006 - the highest proportion witnessed since the fourth quarter of 1991.

Meanwhile, a record number of existing homeowners were also shown to be choosing such deals as some 76 per cent took out the deal. The CML claimed that such findings are “encouraging” as they show that more borrowers are aiming to protect their monthly mortgage payments against the threat of predicted interest rate rises.

However, research carried out by LV= indicated that young consumers are taking a rising number of financial risks in an attempt to buy a home. The study showed that 15 per cent of those aged under 35 are prepared to borrow at four times their yearly income. Meanwhile, just less than a third (30 per cent) are willing to avoid taking out financial protection insurance so they can get as large a loan as possible.

Communications director Nigel Snell claimed that as “younger buyers are prepared to stretch themselves well beyond traditional lending limits without arranging adequate financial protection”, Britons should consider how they would meet mortgage repayments should they suddenly become unable to work.

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