Mortgages most affordable in 14 years

Sarah Davidson

January 16, 2012

Typical mortgage payments for both first-time buyers and homemovers at the long-term average loan to value ratio were 27% of disposable earnings in the fourth quarter of 2011, well below the average of 37% recorded over the past 27 years.

Overall there was a modest fall in payments relative to earnings over the past year from 29% in 2010 quarter 4.

Mortgage payments have nearly halved as a proportion of income in recent years from a peak of 48% in 2007 quarter 3.

Halifax said lower house prices and reduced mortgage rates have been the main drivers behind the significant improvement in affordability.


The 12 UK regions have all experienced an improvement in affordability since mid 2007.

Average mortgage payments as a proportion of average disposable earnings for a new borrower fell two-thirds in Northern Ireland and have nearly halved in both Yorkshire and the Humber and Scotland.

Some 95% of local areas have seen a fall in mortgage payments as a proportion of average earnings of at least 25%.

A clear north / south divide in affordability exists despite and the improvements experienced in all regions since 2007.

Halifax said mortgage payments account for the lowest proportion of disposable earnings in Scotland (20%), Yorkshire and the Humber and Northern Ireland (both 21%).

Payments are highest in relation to earnings in Greater London (35%) and the South East (33%).

The ten most affordable local areas are all in northern Britain whilst the ten least affordable areas are all in the south.

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 and 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.”

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