Five times salary mortgage launched

The country's second biggest lender, Abbey, is giving a boost to first-time buyers priced out of the property market by offering to lend up to five times the buyer's salary.

Abbey's decision to push lending multiples to new levels is likely to be followed by more mortgage lenders, say experts.

Sean Gardner, chief executive of independent comparison site Moneyexpert.com, said: "Rising property prices mean that for a growing number of people, to get on the property ladder or move up it, they need to borrow at much higher multiples of their income than they would have had to do five years ago for example, when prices were nearly half what they are today."

Research by Moneyexpert shows 14 per cent of providers are already lending more than four times borrowers' salaries and 7.5 per cent will lend at 4.9 times or more, compared to 72 per cent who will lend more than three times income.

Ray Boulger, of independent mortgage broker John Charcol, added: "Whilst it is big news that the second largest lender has openly come out with a mainstream mortgage that gives this level of borrowing power to homebuyers, it has been possible to get similar loans from other lenders for a while now.

"Huge increases in house prices in recent years have left many would-be homebuyers out in the cold and lenders across the board have been re-designing their product ranges and criteria to try to help borrowers achieve their home ownership goals.

"Old-fashioned income multiples of around 3.5 times income are now as outdated as the dinosaur and do not reflect current market conditions."

However, Mr Boulger warned homebuyers that before borrowing such large amounts buyers should consider how interest rates will be affecting their mortgage.

"With interest rates hotly tipped to increase not just once, but possibly twice in the next few months, borrowers need to ensure that they are not overstretching themselves, especially if they do not have a fixed rate mortgage, and that if their monthly repayment increases, they will still be able to make ends meet."
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