The Liberal Democrats have warned that consumers are borrowing more on their mortgages than they can afford and many risk finding themselves in negative equity.
The party is basing its warning on figures showing one in 10 borrowers have taken out a mortgage loan worth 4 x their salary or more.
Vince Cable MP, Liberal Democrat shadow Chancellor, says: “This type of lending is recklessly fuelling the housing boom. Many of those borrowers will find themselves in negative equity when the market turns down and interest rates rise. Gordon Brown must address the failures that have allowed banks to lend irresponsibly and fuel unsustainable levels of debt.”
Michael Loughran, branch manager at Leicester-based The Mortgage Advice Centre, says: “Incomes are disproportionate to house prices so this explains why multiples are sometimes high. Most lenders are sensibly basing lending decisions on affordability rather than simply taking an income and multiplying it by a certain figure.”