by Mark Johnston
Mortgages are currently twice as affordable as they were three years ago in the peak of the housing market boom.
Research released by Halifax has shown that current market conditions are resulting in average mortgages repayments being almost half the amount they were back in 2007. Analysts believe this is down to falling house prices and the sustained record low interest rates of 0.5% that have been set by the Bank of England.
The average monthly mortgage payment accounts for around 30% of disposable income whilst back three years ago in the peak of the housing market in 2007, mortgage payments accounted for 50% of monthly income.
To bolster the market further, stamp duty has risen to £250,000 so that 94% of first time buyers are now exempt from this payment making it a lot easier to move house.
The market crash has brought with it many problems though. Up to 50% of potential first time buyers at the moments cant afford to get onto the UK property ladder either because mortgage rates are too high or the deposits required are well out of reach for most would be home owners. Less than 100,000 people purchased their first home in the start of 2010, compared to 200,000 during the same period in 2007.
The reduced first time buyer activity is down to the tough new lending criteria that Banks and Building Societies have put in place. Most lenders are asking for larger deposits than ever before in order to protect themselves from losses in the loan defaults. First time buyers are now under pressure to not just have perfect credit histories to be able to find the large sums of money that lenders require, this is effectively pricing many out of the market altogether.
As one of the Uk’s largest lenders, the Halifax has defended the position by pointing out that whilst deposits are larger in terms of loan to value, the actual amount has’nt changed for some time given that property prices have fallen.
Stephen Noakes, commercial director for mortgages, said: “We believe it’s important that first-time buyers understand that whilst there are still challenges in raising deposits, other market conditions are more positive. Affordability has significantly improved, meaning the amount of a typical first-time buyer’s monthly pay packet that needs to be dedicated to their mortgage is now below the 25 year average and importantly, despite perceptions, eight out of ten first-time buyer mortgages are approved.”
The Halifax are current offering their two year tracker mortgage as 4.49% on top of the Bank of England’s base rate of 0.5% making the current rate for the mortgage 4.99%. The overall cost for comparison is 4% APR with a £995 product fee and a loan to value of 15% or more.
For borrowers looking for a fixed rate so they can manage their monthly payments better, the Halifax has a two year product for 5.99%which reverts back to their standard variable rate current of 3.5%.
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