- Mortgages have become more affordable everywhere except for London and the South East over the last five years, according to new figures from Halifax.
- Lloyds Banking Group
- Mortgage affordability1 improves across the UK except in London and the South East
- Today’s average mortgage payment takes up 28 per cent of a new borrower’s income, 3 per cent less than five years ago and 20 per cent down from the market peak in 2007
- In London a new mortgage will cost an extra £2,000 per year compared to five years ago, while across the UK payments have fallen by an average of £100
- Biggest falls in payment outgoings are in Northern Ireland [£2,880], Scotland [£912] and the North [£780]
- Public sectors workers are more recent winners for mortgage affordability as they achieve parity with the private sector
While taking out a new mortgage in London means spending an extra two thousand pounds [£1,992] per year compared to five years ago, the average payment has actually fallen in the UK by £96, according to new figures from Halifax.
The figures reveal the combined impact of lower mortgage rates, increased average earnings and house price changes over the last five years, which have created some of the most favourable market conditions for mortgages in years.
The greatest mortgage reductions are found in Northern Ireland, where new payments are £2,880 per year less than they were five years ago. New Scottish mortgage holders are paying £980 less than they were five years ago, while those in the North are paying £780 less.
The South East is the only other area outside of London where new mortgage payments are more expensive than they were five years ago, and now cost an extra £612 on average.
As a result of the lower payments, new mortgage payments account for 28% of income, down almost 3 percentage points (2.7%) from 2009. This is also massively down from the high point of the market in 2007, when 48% of income was spent on mortgages.
Craig McKinlay, Mortgage Director, Halifax said:
“In the majority of regions, mortgages are substantially more affordable today than they have been in years. In fact, new mortgage borrowers are spending far less on their mortgages than the highpoint of the market in 2007, when people were spending close to half [48%] of their income on their mortgage.
“The reality is mortgage affordability outside of London and the South East is close to its best level for twelve years. In London however, affordability is worse than it was in 2009, as the capital has shown exceptional house price growth.”
Public and private sector mortgage affordability
The last five years has also seen sweeping changes in affordability for the private and public sector.
In 2009 mortgage payments accounted for 31.2% of a public sector workers income, but by 2014 this had fallen to 27.9%.
For those working in the private sector mortgage payments have fallen from 29.7% to 27.5%.
Craig McKinlay adds:
“Public sector workers in particular have benefited from higher wages over the last five years, with double digit earnings growth in some areas of the UK contributing to substantially improved figures for mortgage affordability. With only £500 separating the average salaries of both sets of workers, the public sector has achieved what would have seemed unlikely five years ago – parity with the private sector.
“Scotland is the clear winner for mortgage affordability for both public and private sector workers, with a mortgage there only taking up an average of 18% of a new public sector salary, which is substantially less than the UK average.”