Council of Mortgage Lenders (CML) data shows that the average first-time buyer (FTB)
borrowed 3.24-times their income, the highest level ever, leading to a change in how a loan is calculated.
“Research by Moneyfacts found five of the top ten mortgage lenders now use ‘ability to repay’ in preference to income multiples in determining the amount they are prepared to lend,” said Julia Harris, mortgage analyst at moneyfacts.co.uk.
“This can in turn lead to borrowers completing a credit application on initial enquiry, which may in turn be declined. And every time this happens a footprint remains on their credit record, not a practice that should be encouraged.”
Spiralling house prices are causing problems for those with debt trying to get their own residence, with surveys showing that many FTBs will turn to parents to fund a home.
In addition, if FTBs take on a mortgage several times their annual salary, there is a greater risk of repossession if financial problems are encountered.