Given this, it is not surprising that 44 per cent of homeowners in this age group are seeing 31 per cent or more of their monthly income going on mortgage repayments. Some 8 per cent of homeowners aged under 25 – around 101,000 people – are using more than 50 per cent of their monthly income for this purpose.
As property prices continue to rise, mform warns that young people will have to borrow more to get onto the property ladder, and also use a higher percentage of their monthly income to pay their mortgages. Indeed, mform analysis of industry data reveals that the amount of money borrowed by a first time buyer to get on to the property ladder has increased by around 180 per cent since 1996. Also, their size of mortgages in relation to their income has grown from 2.3 times to 3.27 times over the past 10 years.
Francis Ghiloni, marketing and business development director, mform.co.uk said: “As house prices increase and mortgage rates rise, people are going to have to use more of their income to pay their mortgages, which will put many under considerable financial strain and could result in them falling behind with their mortgage repayments.
“We estimate that between 2002/03 and 2006, the true cost of a mortgage increased by around 33 per cent, but by shopping around you can keep this dramatic rise in mortgage inflation under control and potentially save thousands of pounds a year.”
mform.co.uk’s research shows that 61 per cent of homeowners aged 25 and under have only been on the property ladder for less than two years. One third (33 per cent) have only been on the property ladder under a year and only 29 per cent have owned a property for three years or more.
