Data from the CML's regulated mortgage survey showed that first-time buyers in April were paying 18.7% of their income on mortgage interest - the highest level since 1992 and up from 18.3% in March and 16.3% in April last year. Rising rates are also affecting home movers who in April were paying 16.3% of their income on mortgage interest - also the highest level since 1992.
Despite last week's decision by the Bank of England to hold rates at 5.5%, borrowers will see further increases in the proportion of income they spend on mortgage interest payments once May's interest rate rise starts to be reflected in CML's data.
Also, in a double whammy for first-time buyers, increasing numbers have to pay stamp duty. In April 58% of first-time buyers were forced to pay tax on their purchase - up from 51% in the same month last year.
It is encouraging that the vast majority of buyers are opting for the certainty of a fixed-rate mortgage, which will protect them against interest rate rises and help them plan ahead financially. In April 88% of first-time buyers took out a fixed-rate loan, down slightly from the record 89% in the previous month. Home movers are following suit, with 72% taking out a fixed-rate mortgage in April. Overall, fixed-rate deals account or 78% of all loans. But borrowers who are about to come off a fixed-rate deal entered into in 2004 or 2005 need to be thinking ahead about how they will absorb higher mortgage payments.
Commenting on today's data, CML Director General Michael Coogan said:
"Month on month we see affordability constraints for first-time buyers worsening. And with the impact of May's interest rate rise still to be felt, many borrowers face higher costs in the coming months.
"The vast majority of borrowers will be able to absorb higher mortgage payments. But with two million fixed-rate loans coming to an end over the next year and a half, many borrowers should anticipate that their mortgage costs are likely to rise and should be planning ahead."
