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According to the Council of Mortgage Lenders (CML) mortgage payers are having to dip even further into their household budget to cover the cost of their mortgages. The figures for first-time buyers are the worst with mortgage payments taking 19.1% of their monthly income, the highest slice since 1992. Other mortgage payers now sacrifice just over 16% of their monthly income to cover their mortgage.
Even though first-time buyers now borrow on average 3.37 times their earnings, other people changing to a new mortgage are also borrowing over 3 times their income. These new high figures have been brought about by two main factors, namely sustained increases over recent years in house prices, but more recently by this year's increases in mortgage interest rates.
Rising interest rates have really scared people taking new mortgages, with a staggering 89% of first-timer buyers and 73% of home movers taking fixed rate deals in May 2007. Some industry watchers have advised caution with fixed rate deals, with many of the attractive deals in recent months being removed from the market.
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