First time buyers 'most at risk' from interest rate rise

10-Nov-2006


First time buyers are most at risk following yesterday's interest rate rise, experts claim.

Following yesterday's interest rate increase to five per cent, economists are increasingly concerned that first time buyers will be particularly affected, especially as mortgage lenders are increasingly willing to provide loans with up to seven times a borrowers annual income.

Furthermore, since 2001 - when interest rates were last at five per cent - mortgage balances have almost doubled, in order to cope with sharp increases in house price inflation.

"We are already seeing a rapidly growing number of people falling behind with mortgage payments and in some cases threatened with repossession," said Sue Edwards, a representative from Citizens Advice.

"We know a lot of people [who] are taking on mortgages that stretch them to the absolute limit," she added.

Indeed, since 2005 the number of households facing repossession has doubled, according to the Times.

In response to the Bank of England's announcement, a number of mortgage lenders increased their interest rates yesterday, including Halifax and Abbey.

For advice on first time buyer mortgages or to find out how much you can borrow and how much it would cost you, contact a good mortgage broker.

Click here for further information on finding a deposit.

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