Debt expert warns of 5x-salary mortgage 'danger'

Plans to allow homebuyers to borrow up to five times their salary could be "dangerous", a leading debt expert warned today.

Malcolm Hurlston, chairman of the Consumer Credit Counselling Service, said an increase in the amount allowed by high street lender Abbey could leave borrowers heavily overstretched.

Abbey has raised the standard amount it was prepared to lend to five times the borrower's salary. Usually lenders offer around 3.5 times.

Nici Audham Gardiner, mortgage product executive at Abbey, said the firm wants to make it easier for people, especially first-time buyers, to get the property and mortgage they want.

She said: "There are people who feel that they do not want to get on the property ladder, but those who do face many barriers, of which the most notable is the cost of homes."

Other factors preventing people from owning their dream home include lack of time, job security and finding the right mortgage, she added.

"Strangely, despite hundreds of mortgages available to buyers, our research shows that 12% of non-homeowners believe that they would be on the property ladder if they could just find the right mortgage."

Mr Hurlston told BBC Five Live: "To some people this is going to look like the answer to their prayers, because suddenly they are going to have the opportunity of borrowing the amount they feel they need to borrow.

"But it risks taking them into very dangerous territory, not least because interest rates are likely to be going up as well.

"They are going to be very heavily stretched and if their salaries don't go up in the way they think they are going to do, they could find themselves dangerously overstretched."

A couple on a joint gross income of £50,000 who borrowed £250,000 would typically face monthly repayments of more than £1,400 at current interest rates.

Abbey said 17.3 million adults are unable to get on to the property ladder, with 7.4 million citing house prices as the main reason.

It has introduced a First Time Buyer product range which includes mortgages that offer 5% cash back or help with up-front costs and mortgages for those with as little as a 3% deposit.

Abbey said that although the income multiples have increased, they are linked to the customer's credit score and mortgages are subject to affordability.