First-time buyers and other homeowners are now facing the highest mortgage interest payments for 15 years as the Bank of England’s four rate rises since last August hit borrowers hard.

First-time buyers, already struggling to get a foot on the property ladder thanks to soaring house prices, are now paying almost a fifth of their income in mortgage interest costs, the Council for Mortgage Lenders (CML) reports this morning.

A survey by the CML revealed that the average household buying a first home is handing over some 18.7 per cent of income to cover mortgage interest. This is the highest level since 1992, and sharply up from 16.3 per cent last year.

Those moving home and remortgaging are slightly better off, but still face the steepest interest bills for a decade and a half. Movers are paying an average 16.3 per cent of income to cover mortgage interest, according to the CML’s figures.

Homeowners with variable rate loans will soon face even bigger bills as lenders pass on the cost of May’s increase in base rates by the Bank of England, which is not yet reflected in today’s numbers, the CML said.

News of the growing financial toll from higher borrowing costs comes hard on the heels of a warning last night from Mervyn King, the Bank of England’s Governor that borrowers - whether businesses or households - should think hard about how higher levels of interest rates would affect their finances when planning their budgets.

“It is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels,” the Governor said at a dinner in Wales.

His blunt reminder came as he signalled that the Bank’s Monetary Policy Committee may well have to push interest rates still higher to head off what he called “persistent inflationary pressures”.

The CML’s figures this morning further emphasised the pressures shouldered by first-time buyers desperate to buy a home. As well as higher mortgage costs, today’s survey showed how the continued surge in house prices is pushing up stamp duty bills for movers. In April, more first-time buyers than ever - some 58 per cent - had to pay stamp duty on their property - up from only 51 per cent at the same time last year.

Michael Coogan, the CML’s Director-General, said: "Month on month we see affordability constraints for first-time buyers worsening. And with the impact of May's interest rate rise still to be felt, many borrowers face higher costs in the coming months.

“The vast majority of borrowers will be able to absorb higher mortgage payments. But with two million fixed-rate loans coming to an end over the next year and a half, many borrowers should anticipate that their mortgage costs are likely to rise and should be planning ahead.”

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