Risk of unmanageable debt levels through increased mortgages
The soaring house prices in the UK have seen many people lose the chance to get on to the property ladder simply because they cannot afford to take out a loan for the amount that is needed to buy a property in the UK these days. Many first time buyers have been borrowing money from family members in order to try and get on the property ladder, and in a bid to try and keep the mortgage industry booming many lenders have changed the way that they lend money for mortgages, offering far higher income multiples and far longer repayments periods on mortgage loans.
However, the concern now is that over-eager first time buyers that take on such a huge financial commitment without giving it much thought could find themselves struggling early on in the mortgage to try and keep up with repayments, and could find themselves in huge levels of debts for many years to come – many will still be repaying their mortgage when they retire, even if they are only in their twenties when they take out the loan.
If house prices do start to fall in the UK those that have taken out huge mortgages over long periods could really find themselves in trouble. Some lenders are offering mortgage repayment terms of over fifty years, and far higher income multiple levels than previously. This could see many young first time buyers lumbering themselves with a huge loan that will still be running when they reach retirement age. And the rising interest rates are simply adding to the risks that first time buyers face, as many will be struggling to make their repayments from the start.
According to some mortgage brokers there are situations where lenders have offered the borrower up to nine times their salary in order to enable them to raise the amount that they need to purchase a property, although lenders state that this type of income multiple is only in very special circumstances.
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