First-time buyer affordability likely to improve

Released on: February 21, 2008, 11:37 pm

Press Release Author: Lilly

Industry: Financial

Press Release Summary: The Council of Mortgage Lenders says that the two recent
quarter-point reductions in the base rate of interest should ease the pressure on
first-time buyers.

Press Release Body: London (Online Unsecured loans) February 21, 2008: The
affordability for first-time buyers should improve in 2008, says the Council of
Mortgage Lenders. Last year, the first-time buyers' affordability fell to a 16-year
low. They paid 19.4% of their income as mortgage interest in the last year - the
highest since 1991 when it reached 21.8%.

However, the recent interest rate cuts should ease the pressure on the first time
buyers looking to get a foot on the property ladder. The CML director-general
Michael Coogan said: "Affordability has been stretched further in 2007, but the
recent base rate cuts and the expectation of future cuts will ease debt servicing
burdens in 2008. For first-time buyers, the combination of subdued house price
inflation and lower mortgage rates means affordability should ease slowly as the
year progresses."

Around 1.4 million people are likely to see their cheap home loan deals end in the
early part of this year. Earlier, the estimates suggested that these people might
have to pay an additional sum of 200 per month on an average to meet their cost of
servicing the home loans. But, the recent cuts in interest rates will soften the
impact of payment shock on a large numbers of borrowers.

The global repercussions of the U.S. sub-prime collapse adversely affected the
credit availability in the UK in the later part of 2007. The interest rates soared
on secured loans and home loans - unsecured personal loans were almost taken off the
shelves by the lenders. The overall situation is likely to improve this year with
the Bank of England taking initiatives to shore up the slowing economy.

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