Mortgage affordability is best for 15 years
Tuesday, 28 August 2012 9:04 AM
Mortgage payments for a new borrower are at their most affordable for 15 years, according to research by the Halifax.
Typical repayments for first-time buyers and home movers stood at 26 per cent of disposable earnings in the second quarter of 2012. That compares with 29 per cent this time last year and a long-run average.
And mortgage payments have now almost halved relative to earnings over the last five years. The proportion peaked at 48 per cent in the third quarter of 2007.
The Halifax’s affordability calculation measures the degree of difficulty faced by new borrowers in entering the housing market based on house prices, mortgage rates and average earnings after deduction of tax and national insurance.
Affordability is better than the long-term average in all 12 UK regions. In Northern Ireland, payments as a proportion of disposable earnings have fallen by two thirds since mid-2007 while in Wales, Yorkshire & Humber and Scotland they have nearly halved.
However, there is still a north-south divide, with Greater London (35 per cent), the South East and South West (both 32 per cent) having the least affordable payments.
Some 98 per cent of local authority districts have seen an improvement in affordability since 2007 of 25 per cent or more.
The most affordable district in the UK is East Ayrshire (15 per cent of local earnings) and the least affordable is Kensington & Chelsea (77 per cent).
Martin Ellis, housing economist at the Halifax, said: "The relatively low level of mortgage payments in relation to income is providing support for house prices.
"The prospect of interest rates remaining at low levels for sometime yet is expected to continue to be a key factor supporting the demand for homes, helping to keep house prices around their current level during the remainder of 2012."
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