Significant improvement expected in affordability

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by Kay Murchie

According to the Council of Mortgage Lenders (CML), a significant improvement should be seen in the affordability of homes this year due to the cost of mortgages falling and the latest round of interest rate cuts.

It is widely expected that the Bank of England will make further interest rate cuts this year but the CML suggest that the 2 recent interest rate cuts will already be enough to make a positive impact in easing affordability in 2008.

A spokesperson for the CML said those coming off fixed-rate mortgage deals will also enjoy the benefits of lower interest rates.

According to estate agents, Spicerhaart, December’s rate cut was enough to boost first-time buying and affordability issues. The agent reported a 2% rise in the number of first-time buyers last month.

Figures from the CML also revealed that 40% of the mortgages issued to first-time buyers last year were for properties valued below £125,000 (the minimum stamp duty threshold), compared to 50% in 2006.

The CML believes stamp duty should be addressed during the upcoming Budget, which Chancellor Alistair Darling will present next month.