October mortgages 'became more affordable'

Posted: 12 Dec 2011 14:01:12 GMT

Persistently low interest rates resulted in mortgages in October being their most affordable since 2004.

The affordability of mortgages in the UK increased to its highest level in almost eight years in October, new research has shown.

Carried out by the Council of Mortgage Lenders (CML), the study revealed the continuation of low interest rates played a significant role in ensuring monthly home loan payments for first-time buyers (FTBs) remained at an attractive rate.

According to the investigation, interest payments for these individuals have carried on tumbling, meaning they now account for an average of 12.3 per cent of income.

This represents the lowest sum since January 2004, while FTBs' deposit requirements have kept stable recently, typically holding at around 20 per cent.

In addition, it was demonstrated that affordability for movers has also improved of late.

It was shown that this group pays an average of 9.2 per cent of their earnings on mortgage interest - which represents the lowest sum since 2002, when such recordings were first made.

Paul Smee, director general at the CML, said: "Despite the fall in lending in October, it is possible that we will see signs of increased activity by first-time buyers in the early months of next year."

The industry figure explained this is because the government's stamp duty concession is due to terminate at the end of March 2012.

He added: "The underlying picture of the market overall, however, is level, albeit at low levels of lending activity."

Despite positive moves regarding the affordability of monthly mortgage payments, the data revealed deposit requirements for borrowers and continued uncertainty surrounding the wider economic outlook are having an adverse effect on lending activity.

The news comes after Selwyn Lim, director of online market information website Mouseprice, recently suggested FTBs could face mixed prospects in the home loan market in the coming 12 months as only a few mortgages are likely to suit their needs.

© Houseladder Ltd