financial independence

Mortgage interest is taking its largest percentage of earnings
for homeowners for 16 years, but lenders are warning that things will
get worse before they get better. The Council of Mortgage Lenders
has issued figures which show how rising interest rates and house
prices have taken their toll on Britain's pay
packets.

Mortgage interest took 17.6% of homeowners'
take-home pay in October the highest level since 1992. For first-time
buyers the figure is even higher, at 20.6%.

With the figures, the CML also warned that homeowners will
struggle to even get a mortgage as lenders tighten their own lending
criteria.

In October mortgage lending was up to 33.5 pounds,
compared with 30.6 pounds in October 2006, and in September 2007,
but it is unlikely to be this high again. October was the last month
before the Northern Rock crisis came to light, and lenders have been
more reluctant to lend since then.

Director general at CML, Michael Coogan, said: "October is the last month we expect lending volumes to be
higher than a year ago as lenders and borrowers will behave more
cautiously in an uncertain and slowing market environment. Lenders have
already responded to the credit squeeze by tightening lending criteria
and increasing some loans costs.
And looking ahead, any uncertainty in the housing market may mean that
borrowers are less willing to stretch themselves financially."

However, overall, in the coming months we expect
the lending figures to be driven more by supply factors rather than
lower consumer demand. For those customers coming to the end of their
fixed rate mortgage in 2008, the potential impact of higher monthly
payments will be diminished by the fall in bank rate this month and
other rate reductions to come early in the New
Year.

Chief UK economist at analysts Global Insight, Howard Archer,
said: "There is undeniably a very real - and growing danger -
that the housing market could see a sharp correction next year.
Probably the biggest risk is that the economy slows sharply over the
coming months and unemployment starts rising significantly. This would
be liable to lead to a marked increase in the number of people having
to sell for distressed reasons, particularly given the extent to which
many households have had to stretch themselves to the limit to buy a
house."