Remortgaging leads to record debt

Will the high levels of mortgage debt prove a problem?

Last year saw Britons pile on record levels of mortgage debt, according to market analyst Datamonitor.

Total borrowing for the first 10 months of 2003 stood at £222bn, higher than for the whole of 2002.

Homeowners remortgaging to release cash from their property or to get a better rate of interest lay behind the surge in new borrowing, the report said.

However, the number of first-time buyers fell as many found themselves priced out of the housing market.

Getting on the ladder

Those first-time buyers able to clamber onto the property ladder could be over-stretching themselves, the report warned.

Key report findings In 2003 remortgaging was up 57% on 2002 levels In August 2003 first-time buyers were lent 2.95 times salary compared to 2.64 in 2002 Annual increase in mortgage debt predicted to fall from 25% a year to 4.6% Source: Datamonitor

Last year, the average first-time buyer borrowed close to three times their salary compared to just over two and a half times in 2002.

Overall, Datamonitor said the huge growth seen in mortgage lending during the past few years was unlikely to continue.

The group expected house price inflation to slow in the next few years, which would slow the build-up of mortgage debt.

Datamonitor said the mortgage market would grow by an average of 4.6% a year until 2008, much slower than the annual rises of 25% seen between 1998 and 2002.