Interest payments hit 15 year high

Two interest rate rises so far this year have pushed up mortgage interest payments for first-time buyers to their highest levels for 15 years.

Data from the Council of Mortgage Lenders’ regulated mortgage survey showed that first-time buyers in April were paying 18.7% of their income on mortgage interest – the highest level since 1992, and up from 18.3% in March and 16.3% in April last year.

Rising rates are also affecting home movers who in April were paying 16.3% of their income on mortgage interest – also the highest level since 1992.

In April, 88% of first-time buyers took out a fixed rate loan, down slightly from the record 89% in the previous month.

Home movers are following suit, with 72% taking out a fixed-rate mortgage in April.

Michael Coogan, director-general of the CML, says: “Month on month we see affordability constraints for first-time buyers worsening.

“And with the impact of May’s interest rate rise still to be felt, many borrowers face higher costs in the coming months.

“The vast majority of borrowers will be able to absorb higher mortgage payments.

“But with two million fixed-rate loans coming to an end over the next 18 months, many borrowers should anticipate that their mortgage costs are likely to rise and should be planning ahead.”