Short-term mortgages 'continue to attract consumers'
Published On 11 July 2007
Despite the public attention that long-term fixed-rate mortgages have recently received, many people still opt for short-term options when buying a home, a new report suggests.Figures gathered by the Council of Mortgage Lenders (CML) show that 89 per cent of first-time buyers, and 73 per cent of all home movers, opted for short-term fixed-rate mortgages in May.
Furthermore, CML data indicates that affordability is continuing to worsen in the UK. In May, typical first-time buyer income multiples reached 3.37 times the average new buyer income - up from 3.33 times in April.
In addition, mortgage interest payments also rose - to 19.1 per cent in the month.
"For anyone wanting to get a foot on the property ladder or move house, each month affordability is becoming worse," commented CML director general Michael Coogan.
"Taking out short-term fixed-rate mortgages may provide some reassurance, but eventually the loans will revert to a variable rate and the risk of a payment shock is real.
"Planning ahead for higher payments is as important as the initial decision to shelter from the risk of higher borrowing costs."
Last week, the Bank of England increased interest rates to 5.75 per cent - the fifth rise since August 2006.
