UK housing market entrants borrow record amounts

First-time homebuyers in Britain are borrowing record multiples of their income to get a foot on the property ladder, a survey showed. The Council of Mortgage Lenders said the typical first-time buyers' mortgage was worth 3.37 times the borrowers' income in May, up from 3.33 times in April.

Those moving up the property ladder are also facing growing constraints. Home buyers in this category typically borrowed 3.03 times their income in May, up from 3.01 times in April and also the highest on record.

"Each month affordability is becoming worse," said Michael Coogan, director general at the Council of Mortgage Lenders.

"The record number of borrowers who are now paying stamp duty makes a difficult situation even worse."

The Bank of England has raised interest rates five times in less than a year to curb price pressures but so far the housing market has held up well.

Data from the Nationwide Building Society showed annual house price inflation picked up to 11.1 per cent last month, its fastest rate in more than two years.

Most commentators expect house price inflation to ease towards the end of the year as the full force of recent rises in borrowing costs is felt. Indeed, the survey showed homeowners are spending more of their income on mortgage interest payments than at any time in the last 15 years.

The pain is only likely to increase since the survey did not take account of either May's or July's interest rate rises and most economists expect rates to hit six per cent by the end of the year.

Against such a background, appetite for fixed-rate mortgages remains strong.

The survey shows 89 per cent of first-time buyers took out a fixed-rate mortgage in May, matching an all-time high set in March. Of those moving house, 73 per cent opted for a fixed-rate mortgage, up from 72 per cent in April.