Mortgage burden soars for first time buyers

The house price boom and rising interest rates mean that first time buyers across the country are now paying almost a third of their total household take home income on their mortgages.

In some parts of London the mortgage burden for people in their 20s has risen to almost 50 per cent of take-home income.

The huge cost of borrowing to get onto the property ladder is detailed in the latest Woolwich Mortgage Affordability research which shows that the average amount of income spent on mortgages by people in their 20s, who have traditionally been the main first time buyers across the country, reached 32.4 per cent in June. This is much greater than the figure for borrowers of all ages, which stood at 20.1 per cent of income in June, itself the highest since the research started in 2002.

According to Andy Gray, Head of Mortgages at the Woolwich, things are likely to get worse for this age group, and the average first time buyer age is likely to go up further from the current median age of 29 years old.

“For those in their 20s not already on the property ladder the outlook for getting on it doesn’t look good, especially with interest rates likely to rise further. We fully expect the average age of first time buyers to go up until people are well into their 30s. For those lucky enough to be on the ladder, the data suggests that in certain areas of London they are already stretched. The last thing any of them need is a further increase in base rates.”

According to the research, people who manage to get on the property ladder in their 20s are paying an average of £586 per month in June 2007, up £233 compared to just 5 years ago – an astonishing 66 per cent increase. The least affordable region is London where mortgage payments eat up 40.5 per cent (£830) of the income of this group. The most affordable is the North East where the figure is 28.3 per cent (£470).

The most stretched first time buyers are in the borough of Brent in London where mortgage payments have reached 48 per cent of income (£853), whereas the most affordable area is the Staffordshire Moorlands, in the West Midlands, where they pay 18.9 per cent (£301).