Home Affordability At Its Best In 14 Years

Mortgage payments for new homeowners have reached their most affordable levels for 14 years. In the last quarter of 2011, average mortgage payments only took up 27% of the borrowers' disposable income, according to new research from Halifax. This is the lowest proportion since spring 1997 when borrowers on average spent 26% of their disposable earnings on their mortgage payments. The current 27% is well below the average of 37% recorded over the last 27 years and has decreased from the 29% that was recorded in the fourth quarter of 2010. Compared to the peak of 48% in 2007, houses have become much more affordable for those who can raise the initial deposit to enter the market.

Although mortgage payments are on average at low levels, there are significant regional variations. There is a clear North-South divide, and while in some areas in Scotland, for example East Ayrshire or West Dunbartonshire, borrowers only have a mortgage burden of 15-16% of their disposable income, those planning to buy in London will often have to face mortgage payments that are 50% or more of their disposable incomes. The least affordable districts in London are Kensington and Chelsea, where mortgage payments take up 78% of disposable local earnings. On a regional level, mortgage payments are the lowest in Scotland, while the least affordable house prices are to be found in London and the South East.

Despite more affordability, the number of new homes for sale has also dropped to its lowest level in over 10 years, which means that in some areas, potential buyers may face difficulties when looking for a suitable property.

The fall in mortgage rates and lower overall house prices have resulted in improved affordability, with a fall in mortgage payments in 95% of local authority districts. Although mortgage payments are now on average more affordable for those who can get on the property ladder, some experts pointed out that lending criteria may also be stricter. The improved affordability has also clearly contributed to more demand in 2011 and should help support the market in the coming year as well, despite economic and financial uncertainties many households are facing.

If you are planning to buy a property or sell your property in the Bournemouth area, have a look at our property services. If you are looking for mortgage advice or independent financial advice, have a look at our financial services.