Five-times-salary mortgage offer

1 November 2006

Britain’s second-largest mortgage provider, Abbey, is to offer borrowers five times their salary, in order to help them get onto the property ladder. That’s compared with the current industry standard, for homebuyers to be offered mortgages of about 4 times their salary.

Abbey says it’s reacting to surging house prices.

However, not everyone will be able to take advantage of the five-times-salary mortgage offer. Individuals or couples will need a 25% deposit and an annual income of £50,000 or more. Only people with good credit ratings and low levels of debt will qualify.

Abbey spokesman Dave Stewart said their customers were continually asking for more money to buy the house they wanted - and so the mortgage lender looked into the affordability ratings of certain people. He said: “We found that people could afford to pay out for bigger mortgages but there just wasn’t anything on the market at the moment offering them what they needed.”

The five-times-salary mortgage offer would mean that a couple borrowing £250,000 with a shared annual income of £50,000 would face repayments of about £1400 a month. That’s £17,000 a year.

Other mortgage lenders are expected to follow Abbey’s move, as they fight for the business of would-be homeowners.