Housing affordability should improve

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First-time buyers typically paid 19.4 percent of their income as mortgage interest in 2007, the highest since 1991 when it was 21.8 percent.

The typical income multiples for first-time buyers - the amount borrowed relative to income to get on the housing market - hit a high of 3.36 times income, the highest level since the survey began in 1974.

Property affordability worsened throughout 2007, due to successive base rate increases up to July, the figures showed.

By December, the average first-time buyer contributed 20.7 percent of their income towards mortgage interest, compared with 17.9 percent the same month the previous year.

However, the CML said the data did not reflect two recent quarter-point cuts in the base rate, which should help to ease the pressure this year.

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.

"The impact of payment shock on the large numbers of borrowers coming to the end of fixed-rate mortgages will also be less than we anticipated last year."

A total 1.4 million people will see their cheap, fixed-rate mortgage deals end in the early part of this year, and earlier estimates suggested they would be forced to pay an average of 200 pounds per month more to meet the cost of servicing their home loans.

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