First-time home costs 'up again'
First-time buyers are finding it increasingly expensive to get onto the property ladder, says the Council of Mortgage Lenders (CML).
Its latest figures show the average first time buyer spent 20.4% of their monthly income on mortgage interest payments, the highest level since 1991.
The report also found there were 28,400 loans to first time buyers in September, down from 34,800 in August.
The CML blames higher interest rates, which it hopes have now peaked.
"Higher interest rates are now beginning to slow the housing market," said CML director general Michael Coogan.
"The Bank of England's decision not to reduce rates earlier this month will have disappointed many borrowers," he added.
"Looking forward, affordability is likely to continue to constrain buying activity, which we expect to remain subdued."
Slowdown
According to the CML, overall gross mortgage lending totalled £30.6bn in September, down from £34bn in August.
That decline will help underpin the widespread view among analysts that the UK housing market is cooling.
First-time buyers also seem to be retreating from the market, and the CML says first time buyers borrowed £3.8bn in September, compared with £4.7bn in August.
The average first time mortgage was worth £118,750, down slightly from £119,000 in the previous month, the CML said.
The CML's Mr Coogan hoped interest rates had now peaked, but warned the full effects of the recent credit crunch have not yet been seen.
At the same time, the CML found that affordability had also worsened for people moving home.
Mortgage interest payments accounted for 17.5% of their income, up from 17.3% in August and at the highest level since 1992.
Movers took out 52,400 loans worth £8.9bn in September, down sharply from the previous month when 68,000 loans were granted totalling £11.5bn.
The CML said remortgaging activity remained buoyant at £11.1bn, up slightly from the previous month, while buy-to-let totalled £6.8bn, the same level as in August.
'Wealth divide'
Liz Overend, from the lobby group Priced Out said the continued strength of buy-to-let was "displacing" potential first-time buyers.
"The gap between those who can afford to buy and the hundreds of thousands of people forced reluctantly to rent is huge and widening," she said.
"First-time buyers are trying to compete with property investors, but find themselves on the wrong side of the wealth divide."
Figures from the Royal Institution of Chartered Surveyors on Tuesday supported the CML's view that buyers were feeling the effects of higher rates and the credit squeeze.
Its latest survey of members in England and Wales showed that house prices have fallen for the third month in a row during October, and at their fastest rate for more than two years.
Source: bbc.co.uk
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