by Mark Johnston
Are Mortgage Payments Lower?
According to a current study, mortgages have dropped to their most affordable level for a decade and are currently almost twice as cheap as at the height of the financial crisis.
After three years of bringing in tougher new checks and higher deposit requirements for borrowers, banks and building societies alike are now starting to slash their mortgage rates following the launch of the ‘funding for lending’ scheme.
It seems that lower house prices and reduced mortgage rates have been the main drivers behind improvements in affordability.
Martin Ellis, Halifax’s housing economist, suggests that “this development has been a key factor supporting housing demand and is expected to remain so in 2013 as interest rates remain low”.
Some experts have suggested that mortgage deals are only expected to get cheaper in the coming months as lenders keep taking advantage of the ‘funding for lending’ scheme.
Although the favourable mortgage affordability position seems to be only a welcome boost for both those who already have a mortgage or for those who are able to raise the required high deposit now needed to buy a home.
Some research has found that while mortgage affordability levels have dropped there is a clear north south divide. It appears that mortgages are the most affordable in Northern Ireland, Scotland and Yorkshire. They are least affordable however in London.
According to some research from a major mortgage lender these cheaper mortgage deals have also helped to keep mortgage payments at their most affordable levels for a decade.
New data has shown that typical mortgage payments for both first time buyers and home movers have plummeted to 28 per cent of average incomes, which is down from the peak of 48 per cent seen in 2007.
Some analysts believe that with the average monthly take home wage at around £2,062, the average monthly mortgage payment now stands at around £580.
These plummeting costs are good news for many hard pressed home owners who are currently battling with increasing food and energy bill prices that continue to rise while average pay increases remain stagnant.
However, the Halifax disagrees with some of these new figures and therefore they suggest that the share of income spent on mortgage payments has remained steady rather than falling further as cheaper mortgage deals have been balanced out by house prices slowly edging up.
Their half yearly study revealed that in fact across the UK the share of wages taken up by mortgage payments has held steady at 28 per cent since mid 2011.
Ed stansfield, chief property economist at a leading consultancy firm Capital Economics, agrees with the Halifax and therefore states that “all the evidence shows house prices are still far too high in relation to people’s incomes”.
Therefore the impact on affordability has not been as positive as it could have been due to house prices slightly increasing at the end of 2012.
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