Mortgage Affordability


The National Mortgage Index shows that mortgage affordability is improving. Whilst house price growth remains moderate in the majority of areas, key indicators of affordability show improvement. What are these indicators? 1) Loan sizes are reducing, indicating that those remortgaging or landlords have benefited from house price growth and thus have more capital when obtaining a new mortgage 2) Salaries. Those obtaining new mortgages or remortgaging have higher salaries than a year ago and 3) First time buyers are younger.

Brian Murphy, Head of Lending for Mortgage Advice Bureau comments, “According to recent data from the Halifax, mortgage payments now represent 30% of earnings in Q4 2016 vs 48% in Q3 2007. This reflects the fact that borrower’s debt servicing costs are significantly lower due to the current low-interest rate environment. This has counterbalanced house price growth over the last two or three years and has enabled those people who otherwise might have found it hard, if not impossible, to buy if interest rates were higher to either get on or trade up the property ladder.

If we look at typical mortgage rates in 2007, around the 6% level for a 2 year fixed rate product versus where we are now, with a typical 2-year fix costing around 2% and many significantly below this ultra-low level, we can see how mortgage affordability is improving.”

Interesting facts from the National Mortgage Index:

  • More people are opting for fixed rate products, 96% to be exact up from 94% in in Feb 16
  • Average applicant age is now 36
  • LTVs have increased slightly
  • The average age of a first time buyer is now 29, down from 32


Like to find out more about the mortgage market? Read the full report here.

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