Mortgages are at their most affordable in 14 years, with payments accounting for just over a quarter (27 per cent) of a new borrower’s income in the second quarter of 2013, research from the Lloyds Banking Group has found.
The mortgage payment to income percentage had previously averaged at 36 per cent over the last 30 years.
It means that mortgage affordability has improved by 21 percentage point since it reached its peak of 48 per cent of income in 2007.
Lower house prices and reduced mortgage rates have been the main drivers in improving affordability, according to the study by the Halifax.
The Government’s Funding for Lending Scheme has also helped lenders to cut mortgage rates.
Although improvements were seen across the UK, there remains a clear north vs. south divide, with Northern Ireland and Scotland having the lowest mortgage repayments as a proportion of income, compared to Greater London, the South East and the South West with the highest.
It follows separate figures from the Council of Mortgage Lenders which shows lending to first-time buyers in the same period reached its largest number since 2007, with 68,200 purchasing their first home in the three months to June 2013.
The amount borrowed by first-time buyers also increased, with an average of £117,000 being borrowed in June 2013.
Halifax mortgage director, Craig McKinlay, said that despite the improvement, many would-be homebuyers were still struggling to get on the housing ladder due to higher deposit requirements.
“The favourable mortgage affordability position is a boost for both those who already have a mortgage and those who are able to raise the required deposit to buy a home. Improved mortgage affordability has been a key factor supporting housing demand and is helping to stimulate the modest recovery that we are currently seeing.
“Significant numbers of would-be home-buyers and movers remain unable to enter the market due to higher deposit requirements than a few years’ ago and low, or negative, levels of housing equity. However, the recent figures showing 10,000 aspiring home-owners have already signed up to the Help to Buy scheme shows the potential of the Government backed schemes to continue to improve access to the market.”