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C&G predicts decline in mortgage affordability

Borrowers&#39 ability to afford their mortgages will continue to deteriorate heading towards next year, according to new research from Cheltenham & Gloucester.

The lender&#39s quarterly housing index reveals little movement with the amount needed for a typical mortgage rising by just 0.7% during the last three months.

There is also little change for first time home buyers, with a 0.5% increase for single income buyers, and 1.2% increase for joint income buyers. Neither have had a significant change in the last year.

However, C&G predicts there will be a deterioration of house price growth in the future months which will gradually increase in 2004.

A decline in the market has been predicted in the past, because many assumed interest rates would rise. Instead, the rates have stayed at a low level for longer than they were expected to. An inevitable rise, it is predicted by economic forecasts, will begin in 2004, reaching a maximum of 4.25% in interest rates.

C&G&#39s managing director Jon Pain says: “This scenario will lead to a small deterioration in affordability.”

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