Morgages Lowest For More Than A Decade

Date Published 31 August 2012

The Halifax Affordability Review shows typical mortgage payments for new borrowers - both first-time buyers and homemovers - at the long-term average loan to value ratio stood at 26% of disposable earnings in the second quarter of 2012.

There has been a continued fall in payments relative to earnings over the past year from 29% in Q2 2011, taking this measure further below the long-term average of 36%.

Overall, mortgage payments have nearly halved as a proportion of income over the past five years from a peak of 48% in Q3 2007.

Karen Marshall Independent Financial Adviser at Lesters said: "Lower house prices and 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. As a result, mortgage payments for a typical new borrower currently account for the lowest proportion of earnings for 15 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 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."

Affordability is better than the long-term average in all regions. Each of the 12 UK regions has seen a marked improvement in affordability since mid 2007. Average mortgage payments as a proportion of average disposable earnings for a new borrower have fallen most - by two-thirds - in Northern Ireland and have nearly halved in Wales, Yorkshire & the Humber and Scotland.

There have been significant improvements in affordability in most local authority districts since 2007. 98% of local areas have seen a fall in mortgage payments as a proportion of average earnings of at 25% or more. 37 areas - nearly 10% of the total surveyed - have recorded an improvement of 50%.