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Saturday 22nd of November 2008
February 13, 2007

New home buyers borrowing more


by Elaine Frei

New home buyers borrowing more

A new report from the Council of Mortgage Lenders (CML) shows that first-time home buyers are currently taking mortgages that total 3.31 times their yearly income, with the typical first-time buyer borrowing £115,499 on an annual income of £35,000.

In 2005, that average borrowing for a new home was only 2.36 times the buyers’ income in a year. This is a result of property prices that are growing twice as fast as income, a trend that has been seen for the past ten years.

Despite the sharp increase in house prices, first-time buyers have not been priced out of the market. Thirty-six percent of all new home loans in 2006 went to first-time buyers, up from 35 percent in 2005. This was much less, however, than the 50 percent of mortgages that were going to first-time home buyers in the 1990s.

Part of the reason that so many people have been able to buy so much money to buy a new home is that interest rates have remained relatively low. In addition, and partly due to the low interest rates, many lenders have lowered the criteria that must be met to borrow money.

The latest figures show that in December 2006, gross mortgage lending was at £28.6 billion, down 14 percent from £33.2 billion in November but still the highest amount lent in any December on record.

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