Mortgage interest payments are now at their highest levels for around 15 years, as a result of the four interest rate rises since last August.
This is particularly bad news for first time buyers, as well as those who are currently struggling to keep up with their monthly mortgage payments, especially as there may yet be another rate rise this year.
According to a survey by the Council for Mortgage Lenders (CML), first time buyers are now paying almost a fifth of their income in mortgage interest costs – the average household buying for the first time is now spending 18.7% of their income to cover mortgage interest, the highest level since 1992, and a sharp rise from last years figure of 16.7%.
For people moving home and remortgaging, the figures are slightly better but they are still paying the highest interest rates for nearly 15 years, at an average 16.3% of income.
In addition, those with variable rate home loans, or fixed rate deals which have ended, will soon have to pay more as mortgage lenders pass on the costs of interest rate rises.
According to Michael Coogan, the CML’s Director-General:
“Month on month we see affordability constraints for first-time buyers worsening. And with the impact of May’s interest rate rise still to be felt, many borrowers face higher costs in the coming months.”
“The vast majority of borrowers will be able to absorb higher mortgage payments. But with two million fixed-rate loans coming to an end over the next year and a half, many borrowers should anticipate that their mortgage costs are likely to rise and should be planning ahead.”
The Bank of England Governor Mervyn King warned that borrowers should think hard about how higher levels of interest rates would affect their finances when planning their budgets.
For those already committed to mortgage deals, this advice is too late, and it is likely that households that are currently struggling to make their monthly payments will face further difficulties in the near future.
Repossessions are on the rise – There were 21,931 house repossessions in the first quarter of 2007, an annual rise of 1%.
If you are having problems with debt and want to avoid repossession, get in touch with Molae Properties, we can arrange for you to sell your house quickly, and help you to stop the repossession process.