New research produced by the Halifax and published today (Mon 27th August), has revealed that mortgage payments for new UK borrowers are at their lowest as a proportion of disposable earnings for 15 years.
Typical mortgage payments for new borrowers – both first time buyers and home movers – at the long-term average loan to value ratio was found to be 26% of disposable earnings in the second quarter of the year.
The Halifax found that payments (in relation to earnings) have been falling continuously since the second quarter of 2011, when the figure stood at 29%. The long term average is 36.1%.
Overall, mortgage payments have nearly halved as a proportion of income over the past five years from a peak of 48% in the third quarter of 2007.
Martin Ellis, housing economist at the Halifax, commented: “Lower house prices are reduced mortgage rates have led to a significant improvement in housing affordability for those able to fund the necessary deposit to enter the market over the past five years.
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 some time 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.”
The research also showed a clear north-south divide in terms of home affordability, which is better in the north. Mortgage payments account for the lowest proportion of disposable earnings in Scotland and Northern Ireland, at 20%. Yorkshire and the Humber was close behind at 21%.
The 10 most affordable local authority districts were all found to be in Scotland, with East Ayrshire topping the list at 15% of local average earnings, followed by West Dunbartonshire at 16.1% with North Ayrshire close behind at 16.2%.
The 10 least affordable local authority districts were all found to be in southern England. Perhaps unsurprisingly, the London Borough of Kensington & Chelsea was found to be the least affordable of the lot, with average mortgage payments for new borrowers accounting for a whopping 77% of average local earnings. Brent was second on the list at 52%, with Hammersmith & Fulham third with 51%.
In Greater London as a whole, payments in relation to earnings in Greater London were calculated to be 35%, with the South East and South West both at 32%.