Mortgage costs rise

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by Kay Murchie

With affordability problems in the housing sector for first-time buyers, it now appears this group of people could be hit again as latest figures show that average mortgage costs have increased to levels not seen since the early-1990s.

In the third quarter of last year, new homeowners devoted around 35% of their income to their mortgage when purchasing a house. This figure is higher than at any time since the previous peak of 34%, achieved in 1990.

However, this significant increase in first-time mortgage costs has meant that large gains have been reported in the private rented sector according to the Chartered Institute of Housing (CIH).

In its UK Housing Review 2007/08, carried out in conjunction with the Building Societies Association (BSA), the CIH established that private rents have only kept pace with income, resulting in considerably lower rents than mortgage costs.

The results found that the cost of renting was 36% lower than the average price of a mortgage in 2007. The report also discovered that the private rented sector has risen by 21% over the last 5 years.

Adrian Coles of the BSA said with first-time buyers finding it more difficult to get onto the property ladder, the private rented sector is providing housing to a rising number of people.

Mr Coles added through the provision of loans to landlords, building societies are helping to ensure the success of the private rental sector.

Finally, Steve Wilcox, author of the review and professor of housing policy at York University, said growth is likely to continue in the private rented sector, particularly as the rates of population and household growth is outstripping current and planned new house building.