Mortgage Payments as % of Income  

 

 

 

According to the Council of Mortgage Lenders, first time buyers are currently, paying an average 20% of their income on mortgage payments. This has increased significantly from 2003, where it fell to 12.3%. But, still lower than the peaks of the early 1990s, when mortgage payments reached 27% of income

A lender would be reluctant to lend a mortgage which would entail repayments more than 25% of total income. Mortgage lenders increasingly use measures of affordability to determine mortgage lending, rather than income multiples.

Anything higher than 25-30% is liable to cause severe financial hardship. This is particularly a problem for people with variable mortgages because the cost of the mortgage can increase with higher base rates (this is what happened in the early 1990s when interest rates increased to double figures reaching over 12%). The bigger the % of income spent on mortgage payments, the more advisable it is to get a fixed mortgage because here at least payments are guaranteed.

Mortgage Payments as a % of income for First Time Buyers

Selected years

Year
Mortgage Payments as % of Income
1977
13.3
1980
18.4
1985
19.2
1989
23.5
1990
27.1
1991
21.8
1996
11.1
1999
12.1
2000
14.3
2002
12.2
2003
11.8
2004
15.0
2005
16.3
2006
16.8
2007
19.4
2007 Dec
20.7
2008 April
19.6

 

number of loans % of total house purchas Age of borrower Advance Av. Income % Advance Income Multiple % of income spent on mortgage payments
    18,500               36 28        113,490           35,000 87 3.30 19.6

Council of Mortgage lenders Statistics