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Mortgage affordability hits new heights

Mortgage affordability hits new heights

Category: Mortgages

Updated: 11/10/2011
First Published: 11/10/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Record low interest rates mean home movers are spending less on their mortgage payments than ever before, new research has revealed.

Home movers paid on average 9.4% of their income on mortgage interest payments in August, according to the Council of Mortgage Lenders, the lowest amount since records began in 2002.

While affordability hit new heights, the data also revealed that the typical deposit needed by home movers stayed unchanged at 31% for a second month.

Meanwhile, first time buyers continued to put down on average 20% of their property's value as a deposit, but had to borrow 3.20 times their income, slightly up from 3.17 times in July.

Elsewhere amongst the figures it was revealed that people are increasingly choosing to remortgage.

Around 33% more remortgage loans were taken out during the month than a year earlier, and 9% more than in July.

At the same time, the number of mortgages approved for people purchasing a house also climbed higher.

Around 52,000 such loans were advanced, 7% up on July and 2% higher than in August 2010, with lending to both first time buyers and home movers reaching its highest for over a year.

Paul Hunt, managing director of Phoebus Software, said the surge was mainly due to an improvement in lender confidence resulting from the likelihood that interest rates will stay low for the foreseeable future.

"This has led to the cheapest ever fixed rates being announced this month, with a two year fix now on the market for less than 2%," he added.

"What's more, the Monetary Policy Committee's latest decision to expand the QE programme will give lenders even more reason to feel optimistic about the ability of borrowers to take on debt.

"It's clear the Bank of England is committed to protecting economic growth and that the current rate of inflation will not cause a rate rise any time soon.

"That's why there has never been a cheaper time to take out a mortgage and even though there are major economic questions still to be answered in the UK , the record affordability of mortgages will sustain the property market in the coming months."

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