Mortgages as percentage of disposable income at 14-year low.
Mortgages are at their most affordable since 1997, according to new research from Halifax.
A study by the lender found that in the second half of 2011 mortgage payments for new borrowers accounted for the smallest proportion of disposable income in 14 years.
In the fourth quarter of the year, typical mortgage payments stood at 27% of disposable earnings. This is significantly lower than the average of 37% the bank has recorded over the past 27 years. Indeed, mortgage payments have almost halved as a proportion of income since their peak of 48% in the third quarter of 2007.
As this table demonstrates, mortgages have become more affordable across all of the UK's regions since the peak:
| Region | Mortgage payments as % of income (2007 Q3) | Mortgage payments as % of income (2011 Q4) | Long-term average (1983-2011) |
|
North |
44 |
25 |
30 |
|
Yorkshire & the Humberside |
40 |
21 |
29 |
|
North West |
40 |
23 |
30 |
|
East Midlands |
44 |
26 |
34 |
|
West Midlands |
48 |
28 |
37 |
|
East Anglia |
44 |
26 |
36 |
|
South West |
55 |
32 |
43 |
|
South East |
56 |
33 |
48 |
|
London |
56 |
35 |
44 |
|
Wales |
47 |
27 |
33 |
|
Scotland |
37 |
20 |
30 |
|
Northern Ireland |
63 |
21 |
30 |
|
United Kingdom |
48 |
27 |
37 |
Sources: Halifax, ONS, Bank of England
Unsurprisingly, there is still a clear north/south divide, with mortgage payments accounting for the smallest percentage of income in Scotland and Yorkshire & the Humber, while accounting for the largest percentage in London and the South East.
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. Mortgage payments for a typical new borrower are now at their lowest in proportion to earnings since 1997.
"The marked improvement in affordability was a key factor supporting housing demand in 2011. The prospect of an exceptionally low Bank of England Bank Rate over the foreseeable future should maintain affordability at favourable levels in 2012. 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."
Meanwhile, the latest stats from the Council of Mortgage Lenders (CML) have revealed that November was one of only two months in 2011 that saw year-on-year growth in lending for property purchase. 47,000 loans for purchase were approved in November, worth £6.9 billion, a rise of 5% in value from October and 3% from November 2010.
First-time buyers also showed an increased appetite for borrowing, taking out 17,300 loans, worth £2.1 billion, up 4% by volume and 5% by value from both October 2011 and November 2010. The CML suggested this increased activity would continue until the Stamp Duty concession for first-time buyers is removed in March.
So what do you think? Have you seen your mortgage repayments become more affordable? Let us know via the comment box below.
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