Mortgage lending and house prices still rising
Nov 24, 2006
The housing market in the UK is as strong as ever even though interest rates have risen twice in the last few months.
Recent figures from the Council of Mortgage Lenders (CML) show that homebuyers borrowed £30.3 billion in October. This was up 12% on the same period last year and 4% more than the September figure. The first rate increase was in August but so far mortgage borrowing has continued to rise. The CML predicts that the market will slow down a little through 2007 as a result of higher interest rates.
House prices are currently rising around 8% a year according to most surveys, but in the last 10 years the average increase has been 10.6% a year. This is well above increases in income which is not good news for first time buyers.
However, the number of first time buyer sales has risen from 28% to 35% in the last 2 years, according to the CML. This is partly due to shared ownership schemes, groups of friend buying together, help from parents and some very high earners. However, many people are stretching themselves to well over the traditional income multiple of 3 times their salary. It has recently become possible to get a mortgage on the high street of 5 times your salary. Lenders now look at affordability which can include outgoings and future earning potential, as well as income.
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