Mortgage affordability worsened again in October because of higher interest rates and rising house prices, the Council of Mortgage Lenders has said.
Mortgage affordability worsened again in October because of higher interest rates and rising house prices, the Council of Mortgage Lenders has said.
The CML said that interest repayments swallowed up 20.6% of first-time buyers' monthly incomes.
The CML said that interest repayments swallowed up 20.6% of first-time buyers' monthly incomes.
That was up from 20.4% in September and the highest level since 1991.
That was up from 20.4% in September and the highest level since 1991.
Meanwhile, Conservative leader David Cameron will ask banks to do more to help householders avoid repossession when their fixed rate mortgages end.
Repossession fears
The CML said that although total mortgage lending held up in October, it expected a downturn in the coming months because of the credit crunch.
The CML said that although total mortgage lending held up in October, it expected a downturn in the coming months because of the credit crunch.
"October is the last month we expect lending volumes to be higher than a year ago as lenders and borrowers will behave more cautiously in an uncertain and slowing market environment," said the CML's director general Michael Coogan.
"October is the last month we expect lending volumes to be higher than a year ago as lenders and borrowers will behave more cautiously in an uncertain and slowing market environment," said the CML's director general Michael Coogan.
"Lenders have already responded to the credit squeeze by tightening lending criteria and increasing some loan costs," he added.
"Lenders have already responded to the credit squeeze by tightening lending criteria and increasing some loan costs," he added.
"However, overall, in the coming months we expect the lending figures to be driven more by supply factors rather than lower consumer demand."
"However, overall, in the coming months we expect the lending figures to be driven more by supply factors rather than lower consumer demand."
Home movers are also being increasingly squeezed.
Home movers are also being increasingly squeezed.
They saw 17.6% of their incomes consumed by mortgage interest payments, the CML said, up from 17.5% in September and the highest proportion since 1992.
They saw 17.6% of their incomes consumed by mortgage interest payments, the CML said, up from 17.5% in September and the highest proportion since 1992.
And higher mortgage rates could lead to more repossessions.
Gary Murphy, a partner in the auctioneers Allsops, says that the number of properties in repossession that they have auctioned has risen from 20% to 50% in the past year.
Liquidity crunch
Liquidity crunch
Earlier this month the CML warned that unless interest rates were cut soon to ease the liquidity crisis in the financial markets, then lenders would not be able to fund half their expected mortgage lending next year.
Earlier this month the CML warned that unless interest rates were cut soon to ease the liquidity crisis in the financial markets, then lenders would not be able to fund half their expected mortgage lending next year.
Since then the Bank of England has cut interest rates to 5.5% from 5.75%, with more cuts widely expected.
Since then the Bank of England has cut interest rates to 5.5% from 5.75%, with more cuts widely expected.
"For those customers coming to the end of their fixed rate mortgage in 2008, the potential impact of higher monthly payments will be diminished by the fall in bank rate this month and other rate reductions to come early in the New Year," said Mr Coogan.
"For those customers coming to the end of their fixed rate mortgage in 2008, the potential impact of higher monthly payments will be diminished by the fall in bank rate this month and other rate reductions to come early in the New Year," said Mr Coogan.
The past few months have already seen a sudden slump in the number of new mortgages for house purchase being approved by banks and building societies.
The past few months have already seen a sudden slump in the number of new mortgages for house purchase being approved by banks and building societies.
As a result, in October, these loans made up just 39% of all loans secured on residential property, the lowest proportion for nearly three years.
As a result, in October, these loans made up just 39% of all loans secured on residential property, the lowest proportion for nearly three years.
Buy-to-let
Buy-to-let
One area that is still thriving is the buy-to-let market, which has created a burgeoning class of new landlords in the past few years.
One area that is still thriving is the buy-to-let market, which has created a burgeoning class of new landlords in the past few years.
The number of buy-to-let mortgages rose to 991,600 in the third quarter of 2007, up by 53,100 from the previous quarter and now account for 10% of all mortgages in existence.
The number of buy-to-let mortgages rose to 991,600 in the third quarter of 2007, up by 53,100 from the previous quarter and now account for 10% of all mortgages in existence.
Despite claims that this sector of the market might be particularly vulnerable to an economic downturn, so far there is little evidence that this is the case.
Despite claims that this sector of the market might be particularly vulnerable to an economic downturn, so far there is little evidence that this is the case.
Just 0.61% of buy-to-let mortgages were 3 months or more in arrears, the CML said, nearly half the level recorded for all types of home loan.
Just 0.61% of buy-to-let mortgages were 3 months or more in arrears, the CML said, nearly half the level recorded for all types of home loan.
Have you been affected by the issues covered in this story? Are you trying to buy a property? Do you have a buy-to-let mortgage? Are you finding it hard to pay your mortage? Are you facing possible reposession? Send us your comments and experiences using the form below.
Have you been affected by the issues covered in this story? Are you trying to buy a property? Do you have a buy-to-let mortgage? Are you finding it hard to pay your mortgage? Are you facing possible repossession? Send us your comments and experiences using the form below.
