Abbey lends five times your salaryNew mortgage to help people on to property ladder
01 November 2006
Abbey is raising the amount it will lend for a mortgage to five times a salary to help people get a foot on property ladder.
The bank – which is the UK’s second largest mortgage lender - is offering the deal to individuals or couples with a 25 per cent deposit and an annual income of £50,000 or more. Usually lenders offer around three and a half times your salary.
A couple on a joint gross income of £50,000 who borrowed £250,000 would typically face monthly repayments of more than £1,400 at current interest rates.
Abbey mortgages spokesperson Nici Audham Gardiner said: ‘Strangely, despite hundreds of mortgages available to buyers, our research shows that 12 per cent of non-homeowners believe that they would be on the property ladder if they could just find the right mortgage.
‘We have made changes to our Abbey mortgage proposition to help more people, especially first time buyers, purchase the home they want.’
Abbey says its own research shows around 17.3 million people can't get on the property ladder.
But a leading debt expert has expressed concern.Consumer Credit Counseling Service Chairman Malcolm Hurlston said that the reported increase could leave borrowers heavily overstretched.
Mr Hurlston told BBC Five Live:: ‘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.
‘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 do, they could find themselves dangerously overstretched.’
However, Abbey has been at pains to point out that it would not allow vulnerable people to over borrow. It said that someone on an income of around £25,000 and with a lower credit score would receive a typical loan of 3.5 times their salary.