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
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