The latest National Mortgage Index suggests that mortgage affordability is improving, despite ongoing increases in house prices in many areas of the UK. Whilst house price growth remains moderate in many areas, key indicators of affordability in terms of mortgage payments include:
- Loan sizes for First Time Buyers, Buy-To-Let Landlords and those remortgaging are decreasing – this potentially reflects that those who are remortgaging (both home owners and Landlords) have accrued more value in their property, so they have more capital to offset against their remortgage amount, with First Time Buyers potentially seeing the cost of entry level properties decreasing
- First-time buyers are now younger – Mortgage Advice Bureau’s data suggests that the age of the average first-time buyer has now decreased from 32 to 29, potentially suggesting that more young people are able to take advantage of the low rates available to fund their first purchase
- Salaries for those who are moving home, remortgaging or are first-time buyers have increased – potentially suggesting that there are marginal but positive upwards movements on salaries
Looking at typical mortgage rates in 2007, around the 6% level for a 2 year fixed rate product versus where we are now, with a typical 2-year fix costing around 2% and many significantly below this ultra-low level, we can see how mortgage affordability is improving.