Banks and building societies have been forced to change the way they lend to homeowners because a combination of rising house prices and low interest rates have transformed the mortgage market.

Just 15 years ago, when spiralling interest rates forced more than 1 million households into negative equity, an income multiple of 3.5 times was fairly typical. Today lenders will offer up to five times salary, with one bank prepared to give seven times salary in exceptional circumstances.

While an income multiple of five or six times salary may seem huge, mortgage brokers say that homeowners can afford the repayments.

Ray Boulger, senior technical manager at John Charcol, a leading independent mortgage broker, said: “Up to the early 1990s, lenders had to budget for interest rates in the mid teens, but over the past eight years the range of bank interest rates has only been between 3.5 per cent and 6 per cent. What that means is that both the lender and the borrower are more confident than they would have been in the past.

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“Basically, borrowing is cheaper. So someone with a mortgage of 3.5 times salary in 1992 who has a 5 times salary today is now devoting roughly the same part of their income to their mortgage repayments.”

In order to deal with increasing requests from first-time buyers and other mortgage customers for bigger and bigger mortgages, many lenders have taken to using an “affordability” model.

Instead of basing a mortgage offer purely on an individual’s income multiple, lenders now assess a number of additional factors. These range from the borrower’s credit rating and unsecured debts to their ability to meet future repayments if interest rates rise.

David Hollingworth, a spokesman for L&C Mortgages, a broker firm, said: “Lenders aren’t increasing income multiples willy-nilly. The affordability assessment is based around the individual’s ability to meet the repayments.

“But the big question is this: will lenders keep finding ways to justifiably increase income multiples without affecting affordability? Or will it just be the case that people won’t be able to afford to borrow beyond a certain level?

“If the latter is the case, there will come a point where house prices flatten out.”