Five-times-salary mortgage “dangerous”

1 November 2006

A leading debt expert has warned that plans to allow homebuyers to borrow up to five times their salary could be "dangerous". It's after the mortgage lender Abbey raised the standard amount it's prepared to lend to five times the borrower's salary. Usually mortgage lenders offer around 4 times a person's salary.

Malcolm Hurlston, who's chairman of the Consumer Credit Counselling Service, said the five-times-salary mortgage could leave borrowers heavily overstretched. He said: "To some people this is going to look like the answer to their prayers, because suddenly they are going to have the opportunity of borrowing the amount they feel they need to borrow. But it risks taking them into very dangerous territory - not least because interest rates are likely to be going up as well."

Abbey has said that it wants to make it easier for people, especially first-time buyers, to get the mortgage and the property they want. The mortgage lender estimates that 17.3 million adults are unable to get onto the property ladder, with 7.4 million citing house prices as the main reason.

However, the debt expert Malcolm Hurlston, says first-time buyers should think very carefully before taking on larger mortgages. He said: "They are going to be very heavily stretched and if their salaries don't go up in the way they think they are going to, they could find themselves dangerously overstretched."

A spokesman for Abbey stressed that homebuyers seeking a mortgage of five times their salary would have their credit ratings and levels of debt taken into consideration.