Mortgage payments take lowest slice of income for 14 years
Posted on 17th January 2012
Mortgage payments for a new borrower in the second half of 2011 were at their lowest as a proportion of earnings for 14 years.
Typical mortgage payments for a new borrower – both first-time buyers and home movers – stood at 27% of disposable earnings in the fourth quarter of 2011.
This is well below the average of 37% recorded over the past 27 years, said the Halifax.
Mortgage payments have nearly halved as a proportion of income, from a peak of 48% in 2007.
However, there is a clear north-south divide.
Mortgage payments account for the lowest proportion of disposable earnings in Scotland (20%), Yorkshire & the Humber and Northern Ireland (both 21%). Payments are highest in relation to earnings in Greater London (35%) and the South-East (33%).
The ten most affordable local areas are all in northern Britain while the ten least affordable areas are all in the south.
Martin Ellis, housing economist at Halifax, said: “The falls in house prices and cuts in mortgage rates in the last few years have resulted in a significant improvement in housing affordability for those able to raise the necessary deposit to enter the market.
“The prospect of an exceptionally low Bank of England Bank Rate over the foreseeable future should maintain affordability at favourable levels.
“This should support the market over the coming 12 months, helping to offset the impact of the downward pressures on demand from the ongoing difficulties faced by households regarding their finances and uncertainty about economic prospects.”