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News: Banks five times salary foray

A mainstream bank is offering borrowers as much as five times their salary in order to help them get onto the property ladder.

The move from the UK’s second largest mortgage lender Abbey, comes as the Bank of England is strongly tipped to increase interest rates to 5% next week and follows other lenders’ recent increases to as high as 4.5 times salary.

Credit counsellors and finance experts have criticised the move but Abbey says it will make offer available to individuals or couples with a 25% deposit for their house and an annual income of £50,000 or more. Furthermore, only borrowers with good credit ratings and low debt levels would qualify, said Abbey.

John Charcol’s senior technical manager Ray Boulger told BBC Radio Five Live: "There will be some who feel perfectly comfortable borrowing that amount of money because they have a lifestyle which means they can afford it.

"However, there are others who prefer to spend more on luxuries and for who it is not suitable."

Other lenders are expected to follow suit in case they are left behind - this will inevitably lead to worry that borrowers are overstretching themselves.

A couple of a joint gross income of £50,000 who borrow £250,000 would expect monthly repayments to be around £1,400, or just over £17,000 a year, said Abbey.

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