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Cheap mortgage could lesson any rate rises

Date: Thu, 25 May 2006

There are concerns that many first-time buyers are stretching themselves to step on the property ladder and are therefore vulnerable to any interest rate rises.

Financial website Moneywise is warning buyers to make sure they shop around for the best cheap mortgage deal and be aware that repayments could increase if the Bank of England raises the base rate.

Mortgage lenders are also reducing the amount available to customers because of fears over possible repayment difficulties. The majority of mainstream lenders tend to offer around three and a half times the main earner's salary plus any second earner's salary, or two and a half times the home buyers' joint salaries.

Editor of Moneywise, Emma-Lou Montgomery: "Many home buyers have stretched themselves to the limit, so could struggle if rates rose."

"The majority could no doubt stomach a small rate rise without too much difficulty but if rates were to keep going up that would undoubtedly put the brakes on the housing market.

"People should make sure they can afford mortgage repayments before burdening themselves with debt that they are not going to be able to repay."


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