How far is too far?

Published 30th Jun 2007

Income multiples for mortgage borrowing are soaring, so it comes as no surprise that one in twelve would now think nothing of borrowing five times their salary or more.

This equates to 3.7 million potential homebuyers looking to take out a mortgage in the next three years, a lot of them first-time buyers who are panicking about getting on that first rung of the property ladder.

Eamonn Rice, chief executive of mform.co.uk said: “Borrowing five or six times your salary would have been unthinkable just a few years ago. But with average house prices pushing well past £200,000, it is understandable that people are becoming willing to borrow more. The old days of mortgage customers only borrowing a maximum of three times their salary are long gone.

“The mortgage industry itself has recognised this with more and more lenders willing to consider higher income multiples and longer repayments terms. Lengthy mortgage terms could quite easily become the norm with people potentially only repaying the capital from the ultimate sale of the property.

“However there are still major risks involved in borrowing five or six times your salary. Customers need to ensure they are receiving the best possible deal and that repayments are affordable. There is no point getting onto the property ladder only to have your house repossessed.”
By Ariane Buteux

Source: ' What Mortgage '

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