Housing market affordability at '12-year high'

Tuesday, 30 August 2011 10:25

The proportion of income devoted to mortgage payments is at a 12-year low, according to research from Halifax .

Across the UK , typical mortgage payments for new borrowers stood at 28 per cent in the second quarter of 2011, the lowest level since 1999, the study revealed.

This figure was also reported to be down by almost half from a peak of 48 per cent in the third quarter of 2007.

Lower house prices and reduced mortgage rates have been the primary contributory factors behind the improvement in affordability, the building society claimed.

However, the average deposit has increased since 2007 quarter three from 20 per cent of the property value to 25 per cent in 2011 quarter two.

Martin Ellis, housing economist at Halifax , said these favourable conditions for consumers are likely to continue, a trend that should help the housing market to recover.

"The improvement in affordability has been an important factor supporting housing demand this year. With the prospect of continuing low rates for some time yet, affordability is likely to remain favourable.

"These affordability gains, together with a slowly improving economy, should help to support demand in the face of pressures from weak earnings growth, relatively high inflation and higher taxes."

Nigel Stockton, financial services director at estate agent Countrywide, suggested the affordability figures are one thing, but it is the deposit percentage that is more important.

"This is particularly the case in the new build arena where 20 per cent deposits are usually required on apartments," he added. "This is definitely holding back the housing market and we expect current lending levels to be lower than in 2010 and there are no signs that this will change in the short term with the Council of Mortgage Lenders reaffirming their lending forecast of £140 billion for 2011. This looks optimistic to Countrywide."

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