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Interest rate hikes mean repayment trouble for first-time home buyers

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by Elaine Frei
Interest rate hikes mean repayment trouble for first-time home buyers

According to a new survey conducted by online mortgage company mform.co.uk, just over 2 million young homeowners say they will have trouble repaying their mortgages at today’s interest rates. Even more – 2.66 million – claim it will be difficult for them to meet their mortgage payments if the Bank of England raises rates again by another quarter of a point. While interest rates are expected to hold steady this month, most analysts believe that the Bank’s Monetary Policy Committee will indeed hike rates again, to 5.75 percent, by August.

The chief executive of mfor.co.uk said that many first-time homebuyers are already spending most or all of their savings on a down payment. Even if they don’t spend all of their money on a huge down payment, many take out loans for 100 percent of the price of their new home, which loans equal a large multiple of their income. First-time homebuyers are now spending 18.3 percent of their income on interest repayments on their mortgages. Last year at this time that proportion was 16 percent.

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News posted: June 6, 2007

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