Mortgages most affordable for 14 years, claims Halifax

Mortgage payments for new borrowers have reached their most affordable levels for 14 years, with typical payments in some areas of Scotland and northern England taking up less than a fifth of disposable incomes, according to research by Halifax.

Average mortgage payments for new borrowers, including first-time buyers and home movers, stood at 27 per cent of disposable earnings in the fourth quarter of 2011. This marks the lowest proportion since spring 1997 when a 26 per cent proportion was recorded, and stands well below the 37 per cent average over the past 27 years.

The study also highlighted a “clear North/South divide”, with the least affordable areas in London and the South East.

Hide Ad
Hide Ad

Kensington and Chelsea in London was the least affordable local authority district, with mortgage payments taking up 78 per cent of disposable local earnings.

The Scottish areas of East Ayrshire, where mortgage payments take up 15.7 per cent of take home pay, and West Dunbartonshire and North Ayrshire, where payments account for 16.2 per cent of disposable earnings, were found to be the top three most affordable local authority districts.

Across the UK, mortgage payments have nearly halved as a proportion of income from their 2007 peak of 48 per cent, as house prices have dropped along with mortgage rates.

On a regional basis, Scotland has the most affordable homes in the last quarter of 2011, with mortgage payments accounting for 20 per cent of disposable earnings, compared with London where payments make up 35 per cent of take home pay.

Hide Ad
Hide Ad

Yorkshire and Humberside and Northern Ireland are also areas where mortgage payments were more affordable, averaging 21 per cent of earnings, while payments in the South East are typically 33 per cent.

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.”

Despite deals becoming more affordable, concerns have been raised that borrowers will face a greater struggle to meet tightened lending criteria this year, despite the wider availability of deals.

Earlier this month, the Bank of England predicted that lenders would increase mortgage ranges further, but cautioned that this would be offset by tougher rules.

Hide Ad
Hide Ad

Fears have also been raised by estate agents that current low transaction levels will be affected further when the stamp duty holiday for first-time buyers ends this spring.

The research is based on Halifax’s database as well as official earnings statistics and Bank of England average mortgage rate figures.