According to the latest research data released by Halifax; “Average mortgage payments for new borrowers as a proportion of disposable earnings” were at their lowest in the second half of 2011, meaning that UK Residential Property affordability in the UK is at its best since 1997!

The Halifax data is obtained by tracking the affordability of residential housing in 386 local authority districts across the UK

Typical mortgage repayments for both First Time Buyers (FTB) and home movers, (as new borrowers) at the long term average Loan To Value (LTV) ratio stood at 27% of disposable earnings in Q4 (Fourth Quarter) of 2011.

Halifax said this is well below the average of 37% recorded over the past 27 years.

There was a modest fall in payments relative to earnings over the past year from 29% in Q4 of 2010 and mortgage payments have almost halved as a proportion of income in recent years from a peak of 48% in Q3 of 2007.

The Halifax data highlights lower house prices and reduced mortgage rates as being the main drivers behind the significant improvement in affordability.

Lower house prices and mortgage rates have resulted in significant improvements in affordability in most local authority districts since 2007.

Martin Ellis, housing economist at the Halifax said “The falls in house prices and cuts in mortgage rates in the last few years have resulted in a significant improvement in housing affordability for those able to raise the necessary deposit to enter the market. Mortgage payments for a typical new borrower are now at their lowest in proportion to earnings since 1997. The marked improvement in affordability was a key factor supporting housing demand in 2011. The prospect of an exceptionally low Bank of England Bank Rate over the foreseeable future should maintain affordability at favourable levels in 2012. This should support the market over the coming 12 months, helping to offset the impact of the downward pressures on demand from the ongoing difficulties faced by households regarding their finances and uncertainty about economic prospects”.

The data does not include remortgages or Buy-To-Let mortgages, whilst it may be great news for First Time Buyers and normal homeowners, it does little to reflect the UK BTL market for property investors, however with higher LTV products emerging for FTBs, it cannot be too long before the lenders realise that us investors do actually know what we are doing and we could even see the return of 100% mortgages….I can live in hope!

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