HALIFAX, UNITED KINGDOM -- (Marketwire) -- 02/04/13 -- Mortgage payments as a proportion of income have fallen by more than two-fifths in the UK in recent years, from a peak of 48% in Q3 2007 to 28% in Q4 2012, according to new Halifax research. Lower house prices and reduced mortgage rates have been the main drivers behind the significant improvement in affordability. The average monthly take- home wage in the UK is GBP 2,062 and the average monthly mortgage payment is GBP 580.
Mortgage payments for a new borrower have remained at their lowest level in relation to earnings for a decade. Typical mortgage payments for a new borrower - both first-time buyers and homemovers - at the long-term average loan to value ratio(1) have been stable at 28% of disposable earnings since mid 2011. This is the lowest level since early 2002 and is comfortably below the average of 36% recorded since 1983.
Martin Ellis, housing economist at Halifax, commented:
"Mortgage affordability has improved significantly over the past few years as a result of falls in house prices and cuts in mortgage rates. This development has been a key factor supporting housing demand and is expected to remain so in 2013 as interest rates remain low.
"The favourable mortgage affordability position is a boost for both those who already have a mortgage and those who are able to raise the required deposit to buy a home. Higher deposit requirements and low, or negative levels, of housing equity for many homeowners, however, mean that significant numbers of would-be home buyers and movers remain unable to enter the market."
There have been significant improvements in affordability in all local authority districts since 2007. Mortgage payments have fallen by at least a quarter as a proportion of average earnings in 95% of local areas. Twenty-five areas have recorded an improvement of 50% or more.
There is a clear north / south divide despite improvements in all regions over the past five years. Mortgage payments are at their lowest as a proportion of disposable earnings in Northern Ireland (20%), Scotland (22%), Yorkshire and the Humber (23%) and in the North West (23%). Payments are highest in relation to earnings in Greater London (36%), the South West (35%) and the South East (34%). Additionally, the 10 most affordable local areas are all in northern Britain, whilst the 10 least affordable areas are all in the south. (Tables 1 and 2)
Current mortgage payments as a proportion of earnings are lower than the long-term average in all regions. Average mortgage payments as a proportion of average disposable earnings for a new borrower have fallen by almost 70% in Northern Ireland, have nearly halved in both Yorkshire & the Humber and the North, and have dropped by over a third in London. (Table 3)
Seven of the ten most affordable local authority districts are in Scotland. Copeland in the North West is the most affordable local authority district in the UK with typical mortgage payments accounting for 14.9% of average local earnings. Copeland is followed by West Dunbartonshire in Scotland (17.6) and Hyndburn, Renfrewshire and North Ayshire (all 17.9%). (Table 1)
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