Call for your free quote 0800 955 0058

Mortgage affordability markedly improves over past decade

Significantly lower interest rates has improved mortgage affordability across the country since the financial crisis according to the Halifax.



The latest research from the Halifax shows the cost of paying for a mortgage as a proportion of disposable earnings has reduced from 47.7% in 2007 to 29.7% on average across the country in 2016.

This has improved 18 percentage points since reaching a peak in 2007 based on new borrowers both first time buyers and home movers and below the long-term average of 35.4% from 1983 to 2013.

Despite average house prices increasing by 7% in the past year, mortgage affordability has remained unchanged at 29.7% in 2015 and 2016.

The Halifax figures show this was due to the fall in mortgage rates reducing from 2.49% to 2.17% during the year.

Mortgage affordability improves in all areas

Since 2007 there has been an improvement in affordability in all local authority districts with mortgage payments falling by 40% as a proportion of earnings in ten areas.

The following table from the Halifax compares mortgage payments as a percentage of disposable earnings in 2007 and 2016.
Region Payments 2007
Payments 2016
London 55.8% 48.6%
South East 55.8% 41.3%
South West  55.2% 34.3%
West Midlands 47.8% 28.4%
East Anglia 44.0% 28.1%
North West 40.3% 23.9%
East Midlands 44.1% 23.2%
North 43.8% 22.8%
Yorks and the Humber 40.1% 22.8%
Wales 46.6% 22.3%
Northern Ireland 63.5% 20.2%
Scotland 37.3% 19.8%
The most significant improvement has been in Northern Ireland where affordability has improved due to the 40% fall in house prices since 2007.

Martin Ellis, housing economist at Halifax said looking back over the decade there has been a considerable improvement in housing affordability across the country which has been maintained over the past year due to the fall in mortgage rates.

Lower mortgage payments for first time buyers and home movers would provide monthly savings of around £220 in 2016 compared to the monthly cost of £888 in 2007.

Remortgage buyers will also have benefited from the fall in mortgage rates and buy-to-let investors would see the borrowing cost reduce relative to rental income.

Clear north to south mortgage divide

Mortgage payments to earnings are highest in Greater London at 48.6% and is the only region where the percentage is greater than the long-term average of 43.5%.

Other regions in southern Britain have high percentages including the South East is at 41.3% and South West at 34.1%.

For buy-to-let landlords affordability is different as they must have a 25% deposit and show the rental income can exceed 125% of the mortgage interest.

In contrast eight out of ten most affordable regions are in northern Britain with Scotland at only 19.8%, Northern Ireland on 20.2%, North at 22.8% and Yorks and the Humber on 22.8%.

Nine out of ten least affordable areas are all in London including Haringey with mortgage payments to earnings of 68.0%, Brent at 66.1%, Camden on 65.0% and Harrow at 62.9%.

For first time buyers affordability is under control with mortgage payments at 32.0% in 2016 which is a substantial improvement on 2007 when it reached a peak of 50%.

Likewise home movers have also benefited with the percentage at 38%, a significant improvement on 2007 peak accounting for 57% of disposable income.

In contract the older homeowner can access their property wealth with equity release buyers rolling-up interest using a lifetime mortgage to help maintain their standard of living as costs rise.

What are your next steps?

Speak to our LCM mortgage advisers if you are planning to move home, buying your first home, remortgaging your existing home to a new cost effective mortgage deal or are a buy-to-let investor.

Learn more by using the mortgage cost calculators, equity release calculator and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage brokers can recommend lifetime mortgages allowing you to receive cash from your property to help maintain your standard of living as costs rise.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.


Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.19% Fixed Rate
60% Loan to Value
£1,025 Lenders Fee
Until 31/01/2022
Reverts to 4.24%
1.47% Tracker Rate
60% Loan to Value
£1,024 Lenders Fee
Until 2-Years Time
Reverts to 4.24%
1.21% Fixed Rate
60% Loan to Value
£1,034 Lenders Fee
Until 30/10/2021
Reverts to 4.24%
1.28% Fixed Rate
60% Loan to Value
£999 Lenders Fee
Until 02/01/2022
Reverts to 4.00%

The latest mortgage news


21 Feb 2018

London remortgage buyers at eight year with flat growth in first time buyers

The number of remortgage buyers in the capital has reached an eight year high in 2017 driven by competitive mortgage rates.

17 Feb 2018

First time buyers are £27,000 better off than renters by owning a home

Costs to first time buyers are £900 per year less compared to renters and over their mortgage term buying a home saves them £27,000.

13 Feb 2018

House prices growth in South West is highest in England, says ONS

Properties in the South West of England are rising at 7.5% over the year compared to the slowest region of London with growth of only 2.5%.

02 Feb 2018

Affordability for city homebuyers reaches worst level for ten years

The rapid rise of house prices in cities has outstripped earnings and means affordability levels have reached a ten year low.

Call for your free quote 0800 955 0058

  • IMPORTANT

    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.

  • WARNING

    Equity Release - Equity Released from your home will be secured against it. Mortgages – Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured against it. Think carefully before securing other debts against your home. The information contained in this website is subject to the UK regulatory regime and is therefore intended for consumers based in the UK.

    CONTACT

    Address:
    9th Floor, 30 Crown Place
    London, EC2A 4EB

    Phone:
    0800 955 0058

    Email:
    info@londoncitymortgages.co.uk

    London City Mortgages Limited is a registered company in England & Wales under company number 09278987. London City Mortgages Limited is an Appointed Representative (FCA no. 655965) of Blackstone Moregate Limited (FCA no. 459051) which is authorised and regulated by the Financial Conduct Authority. LCM and LCM Equity Release are trading names of London City Mortgages Limited.

    2019 © London City Mortgages.
    Website designed & developed by Spyre Media