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28 August 2012

Dramatic improvement in mortgage affordability

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by Gill Montia

Dramatic improvement in mortgage affordability

Mortgage payments for new borrowers are at their lowest for 15 years, according to Halifax.

At the average loan-to-value ratio, payments for both first-time buyers and homemovers accounted for 26% of disposable earnings in the second quarter of 2012, down from 29% in Q2 2011.

The lender’s figures also show that payments have almost halved as a proportion of income over the past five years, down from a peak of 48% in Q3 2007.

Each of the 12 UK regions have seen a marked improvement since mid 2007 – notably, for new borrowers, average mortgage payments as a proportion of average disposable earnings have fallen by two-thirds in Northern Ireland and almost a half in Wales, Yorkshire & the Humber and Scotland.

However, a clear north / south divide in affordability persists with payments in Greater London at 35%; the South East 32%; and the South West 32%.

Halifax housing economist, Martin Ellis, comments: “The prospect of interest rates remaining at low levels for sometime 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.”

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