It is estimated that over 3.7 million potential mortgage customers are considering borrowing at least five times their salary, according to new research from mortgage specialist mform.co.uk,
Their research shows over 1.38 million people would even consider taking out a mortgage worth up to six times their salary. Council of Mortgage Lenders figures show that in 2006, 21% of first-time buyers borrowed four times their salary.
Earlier this year, the National House and Planning Advice Unit (NHPAU) said that homebuyers could face prices of 10 times their income and with the current property market showing no signs of slowing down, it is likely that house prices will continue to rise, thus putting more pressure on first-time buyers to opt for large salary multiple mortgages.
“Borrowing five or six times your salary would have been unthinkable just a few years ago. But with average house prices pushing well past £200,000 it is understandable that people are becoming more willing to borrow more” said Eamonn Rice, chief executive of mform.co.uk.
Mr. Rice also predicted that large mortgages with lengthy repayment terms could become the norm with the majority of people only able to repay the capital from the sale of their property.
Despite the increasing number of very large mortgages, Rice warns there are still major risks involved in borrowing five or six times your salary. He said “Customers need to ensure they are receiving the best possible deal and that repayments are affordable. There is no point getting on to the property ladder only to have your house repossessed” he said.
Mform.co.uk figures also show that 1 in 3 mortgage providers now offer 100% mortgages and 10 lenders offer more than 100% mortgages.