Plight of first-time buyers is worse than ever

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The Independent Online

The plight of first-time buyers struggling to get on the housing ladder is worse than ever, according to figures released yesterday.

The Council of Mortgage Lenders said the average person buying their first home takes out a mortgage worth 3.29 times their income - the highest multiple since the survey began in 1974 and up sharply from 2.4 at the start of 2000.

The figure reflects the long-running boom in house prices, which have outstripped buyers' incomes. First-timers are now borrowing an average £113,877 to pay for their first properties.

In a painful double-whammy, more first-time buyers are also being hit by stamp duty - 56 per cent in November compared with 48 per cent a year ago. The situation is particularly acute in London, where City bonuses have boosted property prices by more than the rest of the country. Only 5 per cent of houses in the capital are below the stamp duty threshold of £120,000.

CML director general Michael Coogan said: "Month on month, we see affordability constraints becoming more pronounced for first-time buyers, and last week's interest rate rise will increase these pressures."

The quarter-point increase in the base rate to 5.25 per cent will add £16 to monthly payments of those with a £100,000 repayment mortgage.

Research by the Royal Institution of Chartered Surveyors (Rics) shows that a two-person household will have to save 82 per cent of their joint take-home pay simply to fund the up-front costs of buying their first home.

Rics senior economist David Stubbs said: "It is raising the money to pay for these initial costs, such as a deposit and possibly stamp duty, that actually provides the biggest obstacle to prospective first-time buyers accessing the housing market."

Despite the growing financial hurdles, home ownership remains an aspiration for many. Some 37,000 new households clambered on to the property ladder in November, up from 35,300 in October, the CML says.

Mr Coogan urged first-timers not to over-stretch themselves by taking on a bigger mortgage then they could comfortably afford. "It is essential that anyone wanting to buy their first home should look carefully at their finances and take a realistic view as to whether they can afford the costs of home ownership if [interest] rates continue to rise," he said.