21/02/2008
Data recently announced by the Council of Mortgage lenders (CML) confirms that mortgage affordability worsened during 2007 with base rate rises and we also know that key household bills, including fuel and utility bills also rose.
Affordability for first-time-buyers worsened through 2007. By December first-time buyers typically contributed 20.7% of their income towards mortgage interest, compared with 17.9% in December 2006.
The CML expects the two base rate reductions since December will help to ease debt servicing burdens into 2008.
Another question increasingly on the minds of mortgage borrowers is whether or not to take out a fixed rate loan or take a chance that rates will fall further and opt for a discounted variable rate.
A record proportion of borrowers (73%) took out fixed-rate mortgages in 2007 (according to the CML) to ensure certainty in their future monthly payments. Take-up dropped towards the end of 2007 (64% in December compared with a peak of 77% in June and July) in anticipation of the base rate reductions.
Many fixed rates have also factored in some future rate reductions and in choosing your type of loan it is worth consulting a financial adviser who can help you decide what is appropriate in your individual circumstances. For many the certainty of fixed rates is better than trying to gamble on rate changes.