UK House Prices Situation at 18 5 2007: Limited growth in most areas except London

UK House Prices Forecast: Continued above-inflation growth in London & SE only

Mortgage Affordability Increasingly Stretched

New figures have revealed just how far people's finances are being stretched by current house prices. Research performed by the Daily Telegraph and Lombard Street Research has shown that mortgages are now taking as much as 45% of the average salary.

This has resulted in affordability – the measure of borrower's ability to pay back their debts – being severely stretched as people struggle to maintain their position on the housing ladder in the face of rising prices and increased interest rates.

Mortgages have not taken such a high proportion of peoples' incomes since 1989 – just before the last house price crash. Martin Taylor, a senior economist at Lombard Street Research, commented that "Given the level of debt households now have, interest rate rises could impose quite a squeeze."

The Bank of England increased interest rates by a further 0.25% to 5.5% on the 10th May.

London Has The Most Expensive Property In The World

Wealthy foreign investors and booming City institutions have helped make London the most expensive place in the world to buy a home, a new report from upmarket estate agents Knight Frank reveals.

The research shows that the average cost of "prime central London property" is £2300 per square foot – compared to just £1600 per square foot in desirable areas of New York. In fact, London's best properties are even more expensive than homes in Monaco, which check in at £2190 per square foot.

First-Time Buyers "Face Huge Barriers"

The number of first-time buyers is on the decline, according to new figures from the Council of Mortgage Lenders (CML). March saw just 33,100 first-time buyers make it onto the property ladder – down 8% from March 2006.

Those first-time buyers that do manage to get a mortgage are borrowing more, too. In March 2006, the average first-time mortgage was 3.15 the borrower's income – one year later that multiple has risen to 3.31 times income – showing just how rapidly affordability is being stretched.

Royal Institution of Chartered Surveyors spokesman David Stubbs commented that "First time buyers now face huge barriers to home ownership", and went on to add that further rises in interest rates will only make the situation worse.