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 First-time buyers stretch to reach property ladder
First-time buyers were stretched to their limit in July 2006 when trying to buy a house, new research reveals.
Figures from the Council of Mortgage Lenders (CML) showed that first-time buyers had to borrow around 3.24 times the average income in order to buy a property in July.
This was the highest level of income multiples for first-time buyers ever, up from 3.21 times the average income in June and 3.06 times the average income in June 2005.
Income multiples, as well as the proportion of income used to service mortgage interest payments may continue to rise for first-time buyers in coming months, the CML predicted, reflecting August's interest rates rise.
The CML said: "It is essential first-time buyers, and all borrowers, look at their finances to ensure they are taking sensible steps to ensure their debts are manageable, especially as the markets are expecting a further interest rate rise later this year.
"They could, for example, choose a fixed-rate deal to protect themselves from rising rates. They could also ensure they are adequately insured and protected against unforeseen changes in circumstances."
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Over a third of households can't get on property ladder
Rising house prices means that more than a third of working households aged below 40 in the UK cannot afford to get onto the property ladder
A report from social research charity the Joseph Rowntree Foundation found that house prices have been rising faster than earnings, with the ratio of mortgage costs to earnings for first-time buyers now at the 36 per cent peak last seen in 1990.
The number of households in the UK has grown by 35 per cent since 1971, despite the population growing by only eight per cent, due in part to an increase in the number of adults living alone.
While the total number of homes has overall kept up with this growth in households so far, the rate of household growth in England is expected to accelerate to 220,000 new households a year from 2006-21, meaning an increase in house building is needed, the report said.
Meanwhile, the number of new affordable homes being built for those who need subsidised housing is not keeping up with demand, with house building levels only half those achieved in the mid-90s.
Co-author of the report Guy Palmer said: "The most pressing policy challenges concern increasing affordability for first-time buyers and ensuring housing is available for those on low incomes.
"The government needs to refine the methods for judging regional and local imbalances between household growth and housing stock."
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