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Mortgages At Most Affordable Level In 10 Yrs

March 22nd, 2018

Mortgages here in the UK have now reached their most affordable level in ten years, with typical payments accounting for 29 per cent of disposable income in the last quarter of 2017. This compares to 48 per cent in the third quarter of 2007.

This is according to new research from Halifax, revealing that mortgage affordability levels have dropped by nearly 40 per cent for both first-time buyers (FTBs) and home movers since the peak back in 2007.

Since then, there have been big improvements in affordability in nearly all local authority districts, with payments dropping by at least 30 per cent as a proportion of average earnings across 35 areas. Northern Ireland saw the most improvements, with affordability improving because of a significant drop in house prices – now 44 per cent lower than in 2007.

In England, meanwhile, South Bucks saw the most significant improvement, with the proportion of average disposable earnings going towards mortgage payments falling from 93 per cent to 53 per cent, a drop of 40 percentage points in the last ten years.

However, it’s worth noting that affordability has actually worsened in the last five years as average house prices have climbed. The average mortgage rate dropped from 3.7 per cent in 2012 to 1.98 per cent at the end of last year, but average house prices rose by 40 per cent over the same timeframe.

Mortgage director at Halifax Andy Bickers commented on the news, saying: “This is a real boost for both those who already have a mortgage and those preparing to take their first step on to the property ladder. Improved mortgage affordability has been a key factor supporting housing demand and helping to stimulate the modest recovery that we are currently seeing.

“In recent months we have seen the number of first-time buyers and home movers purchasing a home with a mortgage bounce back towards 2007 levels, and mortgage payments becoming a much smaller proportion of disposable income across most of the country will also support a heathy market with more choice and opportunity for buyers/borrowers.”

Further Halifax stats also show that FTB numbers are on the rise, estimated to have reached 395,000 last year – a rise of six per cent. Although the average price of a typical first property has risen by 21 per cent (£37,377), FTB levels have now nearly returned to those seen in 2007 – a hike of 87 per cent compared to the all-time low of 192,300 back in 2008.

Now, FTBs account for half of all house purchases with a mortgage, up from the 36 per cent seen ten years ago. Commenting, managing director of Halifax Russell Galley explained that this ten-year high represents healthy movement in this part of the housing market, in spite of the fact that there is a shortage of properties and it’s still proving challenging for FTBs to save for their deposits.

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