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Last Updated: Wednesday, 23 February, 2005, 12:30 GMT
First-time homebuyer debt rises
The south west is the most expensive region
Mortgage payments for first-time buyers have nearly reached levels seen in the last housing boom, Shelter has said.

According to Shelter's Roof magazine, first-time buyers in England are spending 20.4% of their pay on their mortgage, compared with 20.5% in 1990.

There are concerns that some first-time buyers may have taken on too much debt and could struggle if rates rise.

Shelter said a typical first home in England is now 60% less affordable than a decade ago.

Soaring prices

Mortgage payments in England are now 33% higher than the average over the last twenty years following soaring house prices in the past five years, it added.

Roof magazine's research is part of its annual affordability index which analyses the average incomes of working age households and average mortgage costs for first-time buyers.

North East of England: 13.1%
North West of England: 15.8%
Yorkshire: 16.6%
East Midlands: 17.4%
West Midlands: 18.3%
East of England: 21.6%
London: 22.8%
South East of England: 22.2%
South West of England: 23.3%
England: 20.4%
Wales: 17.2%
Scotland: 13.7%
Northern Ireland: 14.2%
* Percentage of income spent on mortgage payments

The south west of England is the most expensive region for young buyers to purchase a home, according to Roof.

First-time buyers in the south west are spending 23.3% of their income on mortgage debt, compared to 22.8% in London.

In contrast, the north east of England is the cheapest place for first-time buyers. A first-time buyer living in this part of the country will spend, on average, only 13.1% of their pay on their mortgage.

Mortgage payments in Scotland are also low at just 13.7% of pay. Meanwhile, in Wales, first-time buyers are paying on average 17.2% of their incomes on mortgage payments and, in Northern Ireland, this figure stands at 14.2%.

Different landscape?

Although the survey suggests affordability in England is nearly at 1990 levels, there are major differences between the two booms.

In the late 1980s and early 1990s, borrowers were blighted by double-digit interest rates, with rates peaking at 15.4% in 1990.

Unaffordable rates combined with rising unemployment led to 75,000 repossessions in 1991.

In contrast, there were only 6,000 repossessions last year and the Bank of England base rate is currently 4.75%.

Peter Gettins of London & Country, a mortgage broker, said first-time buyers should fix their payments if they were concerned about future mortgage commitments.

"There are some very low fixed-rate deals around. If you fear that you may have overstretched yourself, then fixing your loan rate should give borrowers peace of mind and ensure mortgage payments will stay the same."

1994 1997 2000 2004
Average price 48,231 52,674 75,840 134,089
Average income 27,248 30,680 35,308 41,601
Average monthly repayment 283.95 316.74 446.74 688.41
Average repayment as a % of income 12.5% 12.4% 15.2% 19.9%
Source: Roof


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