Mortgage Interest Payments at 15 Year High
by Gill Montia
Story link: Mortgage Interest Payments at 15 Year High
New data from the Council of Mortgage Lenders (CML) suggests that interest rate rises have increased mortgage interest payments for first-time buyers to their highest levels for 15 years.
The CML’s regulated mortgage survey shows that in April 2007, first-time buyers were paying 18.7% of their income on mortgage interest. This compares with 18.3% in March 2007 and 16.3% in April 2006.
Higher rates are also affecting those moving home; in April income spent on mortgage interest stood at 16.3% for this group, a level not reached since 1992. Last week the Bank of England decided to hold interest rates at 5.5% but borrowers are expected to see further increases in the proportion of income they spend on mortgage interest when rises implemented in May are included in the CML survey.
The majority of first-time purchasers continue to choose fixed-rate mortgage products, to help with financial planning. In April, 88% of first-time buyers selected a fixed-rate loan, compared with 72% in the case of those already on the housing ladder. Fixed-rate mortgages account for 78% of all loans and two million such loans will come to an end over the next 18 months, leaving many borrowers to face higher mortgage costs.
In addition, the majority of first-time buyers are now paying stamp duty. In April, 58% paid the duty on their purchase, compared with 51% in April 2006.
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