Affordability 'worsens by 350%'

The Royal Institution of Chartered Surveyors (Rics) has revealed that the cost of buying a home has worsened by 8.4 per cent in the 12 months to the second quarter of 2007, and by 350 per cent since 1996.

Rics has highlighted the acuteness of the problem faced by those on lower income bands, with a first-time buyer couple earning under £26,000 a year now required to save 96 per cent of this amount in order to afford the initial costs of buying a home.

That same couple will still find 44 per cent of their income swallowed up by mortgage payments if they do manage to buy a home, the study added.

"House prices have risen by over 11 per cent a year since 1996 whereas first time buyer incomes have only risen by 3.5 per cent a year," advised Rics senior economist David Stubbs.

"This has forced buyers to borrow ever greater amounts and now higher interest rates are applying pressure to the household finances of recent buyers," Mr Stubbs added.

However, the economist did suggest that such problems may now be peaking. The Bank of England will meet tomorrow (September 6th) to make the latest decision on interest rates, with the vast majority of observers expecting the base rate to be frozen at 5.75 per cent for the second month in a row.


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