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Low mortgage rates have been a persistent theme in recent years, and happily, this trend has had a welcome side-effect, with mortgage affordability dramatically improving as a result.
According to research from Halifax, mortgage affordability has gone from strength to strength over the last decade, improving by 18 percentage points since its peak in 2007. The figures show that typical mortgage payments for new borrowers (based on the historic average loan-to-value of 70%) stood at 30% of disposable income in the final few months of 2016, well below the peak of 48% recorded in 2007.
It's also comfortably below the long-term average of 35%, and means borrowers are now devoting far less of their disposable income to mortgage payments. Not only that, but the 30% figure is also unchanged from 2015, despite average house prices rising by 7% over the year, which suggests that low mortgage rates really are the key influence.
Indeed, Halifax's figures show that the average rate fell to 2.17% at the end of the year, down from 2.49% at the beginning of 2016, mirroring our own figures which reveal dramatic cuts over the 12-month period.
Martin Ellis, housing economist at Halifax, commented on the findings: "Looking back almost a decade, there has been a considerable improvement in housing affordability across the country, which has been maintained over the past year as further falls in mortgage rates have offset the effects of higher house prices.
"The significant reduction in mortgage payments by a typical borrower has resulted mostly from record low rates that have provided monthly savings of, on average, around £220 in 2016 compared to a peak monthly payment of £888 in 2007."
So, are you benefiting from improved affordability? If not, it could be time to take a look at your mortgage rate! If you're coming to the end of a fixed rate deal or are already on your lender's standard variable rate (SVR), it's high time you compared alternatives. Thanks to rates being so low, you could easily save a small fortune by remortgaging, so check out our mortgage Best Buys and see if you could bring your payments down even more.
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