Mortgages in the UK are at their most affordable level with homeowners spending less than a third of their income on repayments.
Research from the Halifax reveals homeowners are spending 29% of their disposable income on mortgage repayments in the fourth quarter of 2017, the lowest affordability for ten years.
The data includes first time buyers, home movers and remortgage buyers shows spending has reduced from the peak reached in 2007 at 48% of disposable income.
Mortgage affordability levels have dropped significantly over this period predominantly due to historically low fixed mortgage rates even with the first base rate rise in a decade last November.
Lower fixed rate mortgages benefit buy-to-let investors as they can remortgage to reduce the cost interest repayments to lenders.
Mortgage affordability better in most areas
In 35 local authority districts (LADs) there has been a significant improvement in mortgage affordability over the decade with payment costs reducing at least 30% of average earnings.
Of all districts three-quarters have seen an improvement of at least 15% since 2007.
The following table from the Halifax shows regionally affordability of mortgage payments as a proportion of disposable income in quarter four 2007 compared to 2017.
| Region | 2007 Q4 |
2017 Q4 |
|---|---|---|
| Northern Ireland | 63.1 | 18.8 |
| Scotland | 38.0 | 20.1 |
| North | 43.8 | 20.6 |
| Yorks and the Humber | 39.6 | 23.0 |
| North West | 40.7 | 23.1 |
| Wales | 46.7 | 24.8 |
| East Midlands | 44.3 | 26.9 |
| East Anglia | 43.1 | 28.4 |
| West Midlands | 49.4 | 29.0 |
| South West | 55.2 | 33.8 |
| South East | 54.6 | 40.2 |
| London | 52.4 | 44.8 |
The biggest improvement has been in Northern Ireland due to a significant fall in house prices where affordability is 44% lower than in 2007 and the lowest in the country.
There remains a North-South divide with Northern Ireland on about 19%, Scotland and the North with 20%, Yorks and the Humber and the North West on 23%.
Regions in the South of England have the worst affordability with London on 45%, the South East on 40% and South West on 34%.
For remortgage buyers switching to a low cost preferential mortgage deal allows you to make savings and by making overpayments you can repay your mortgage early reducing the overall cost.
House price rise increasing repayment costs
Over a five-year period the 40% rise in house prices in the UK has seen affordability deteriorate even though mortgage rates have fallen from 3.7% in 2012 to 1.98% in 2017.
As a result 89 LADs have seen mortgage payments as a proportion of disposable income rise by at least 5%.
Elmbridge is less affordable having mortgage costs as a proportion of income increasing from 34% five years ago to 56% and Merton in Surrey has seen costs rise from 33% to 52%.
Andy Bickers Mortgage Director at Halifax said, more affordable mortgages are a boost for those who already have a mortgage and those preparing to take their first step on the property ladder.
In recent months we have seen the number of first time buyers and home movers bounce back towards 2007 levels as mortgage payments are a smaller proportion of disposable income, Mr Bickers says.
Rising house prices and lower mortgage rates have also benefited the older equity release mortgage buyer accessing wealth in their property to improve their quality of life or even buy a more expensive home.
What are your next steps?
Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on anything such as repay an interest only mortgage or help your children start or expand a business.
Learn more by using the mortgage monthly cost calculators, property value tracker chart and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
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