Proportion of income dedicated to mortgage interest falls

Date:Friday 16th January 2009
Author: Susanna Kavka

Mortgage holders are having to dedicate a smaller proportion of their income to interest payments, new figures from the Council of Mortgage Lenders (CML) show.

First-time buyers typically paid 18.2 per cent of their income on this in November, a statistic which the CML said had not been so low since February the previous year.

In the same month, home movers apportioned 14.4 per cent of their income on interest, which was the lowest amount since April 2006.

The CML put this down to stricter lending criteria, meaning that borrowers who could get loans were in stronger financial states.

November also saw a 25 per cent fall in the number of remortgages made compared to the previous month and a 36 per cent decline from the same month in 2007, the CML figures show.

Research by has found that most Britons (52 per cent) are on fixed-rate mortgages, meaning that they will not benefit from the base rate reduction.

Sharon Bratley, chartered financial planner at the group, noted that mortgage rates on new fixed-rate deals are starting to come down and suggested that borrowers whose mortgages are expiring shop around.