Trouble for 2 million young homeowners

Over 2 million young property owners have admitted they will struggle to meet their mortgage repayments due to rising interest rates.

Some 2.07 million homeowners aged between 18 and 34 (the majority of them first-time buyers) say they will have problems with the increased cost of borrowing, according toa survey by online mortgage company mform.co.uk.

That figure will rise to 2.66 million if there is another quarter-point hike in the Bank of England base rate.
The Monetary Policy Committee raised interest rates for the fourth time in nine months in May, as widely expected, taking them up 0.25 percent to a six-year high of 5.5 percent.

Rates are now a full point above the level of last summer and two points above the multi-decade low of 3.5 percent hit in mid-2003.

Eamonn Rice, chief executive of mform.co.uk, said the recent base rate hikes had "hit many homeowners hard".

"In particular, many first-time buyers either use all or most of their savings for a deposit or take out 100% mortgages, and have loans that are a huge multiple of their income," he added.

First-time buyer income multiples have risen to 3.31 from 3.15 a year ago, according to the Council of Mortgage Lenders.

Those taking their first steps up the property ladder now spend on average 18.3% of their income on mortgage interest repayments, up from 16% on the year.