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Halifax: Mortgage payments at 15-year low

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28/08/2012
Mortgage payments for a new borrower are at their lowest as a proportion of disposable earnings for 15 years, according to Halifax research.

Typical mortgage payments for new borrowers, both first-time buyers and home movers, at the long-term average Loan to Value (LTV) ratio stood at 26% of disposable earnings in the second quarter of 2012.

Overall, mortgage payments have nearly halved as a proportion of income over the past five years from a peak of 48% in Q3 2007, said the lender.

Martin Ellis, housing economist at Halifax said lower house prices and reduced mortgage rates have led to a significant improvement in housing affordability for those able to fund the necessary deposit to enter the market over the past five years.

“As a result, mortgage payments for a typical new borrower currently account for the lowest proportion of earnings for 15 years. The relatively low level of mortgage payments in relation to income is providing support for house prices.

“The prospect of interest rates remaining at low levels for some time yet is expected to continue to be a key factor supporting the demand for homes, helping to keep house prices around their current level during the remainder of 2012.”

Halifax found that average mortgage payments as a proportion of average disposable earnings for a new borrower have fallen by two-thirds in Northern Ireland and nearly halved in Wales, Yorkshire & the Humber and Scotland.

Payments are highest in relation to earnings in greater London at 35%, the South East and the South West, both at 32%.

The most affordable local authority district in the UK with typical mortgage payments accounting for 15% of average local earnings is East Ayrshire, which is followed by West Dunbartonshire at 16.1% and North Ayrshire at 16.2%.

The ten least affordable local areas are all in southern England. Kensington and Chelsea is the least affordable local authority district in the country with average mortgage payments on a new loan accounting for 77% of average local earnings.

The London boroughs of Brent and Hammersmith & Fulham are the next least affordable, at 52% and 51% respectively.

Meanwhile, Hometrack reported this week that national house prices have fallen for the second month in a row in August, slipping by 0.1%.

Its house price index revealed that demand across the country has fallen for the past three months, according to 1,500 estate agents and surveyors.

Richard Donnell, director of research at Hometrack said: “Nationally demand fell for the third month in a row, by -1.3% in August, while supply continued to grow at 0.8% albeit at a slowing rate. The balance between housing demand and supply is widening suggesting further downward pressure on prices.”

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