United Kingdom Home Affordability At 5-Year High

The mortgage debt burden is trending down for UK homebuyers, and is nearing an all-time low for non-first time  homebuyers. Purchase loans are accounting for a growing proportion …

The mortgage debt burden is trending down for UK homebuyers, and is nearing an all-time low for non-first time  homebuyers. Purchase loans are accounting for a growing proportion of lending as well, with refinancing figures falling. Housing prices rose on the year, and mortgage interest affordability is making the UK market more attractive. See the following article from Property Wire for more on this.

Property buyers in the UK need to use less of their income to cover their mortgage interest than at any time for more than five years, according to new figures.

In particular, home movers are experiencing a low debt burden by historical standards, says the Council of Mortgage Lenders. They typically needed only 10.6% of gross income in November 2009 to cover mortgage interest payments, down from 11.1% in October.

Other than a brief low of 10.2% in the middle of 1996, this is the lowest debt burden on home movers since the CML started recording this data in 1974.

The debt burden on first time buyers also reduced, with 14.4% of gross income needed in November, down from 15.1% in October, the lowest it has been since May 2004.

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Lending volumes experienced a seasonal dip in November. But although the 53,000 house purchase loans represented a 4% decline on October, the number was an emphatic 66% increase on November 2008.

On the other hand, the 31,000 loans for remortgage fell 6% from October with a drop of 39% year on year, showing a continuation of the ‘two speed’ market for house purchase and remortgaging.

Loans for house purchase in November accounted for 60% of total new lending, the highest proportion since 2001. While the share of house purchase activity has grown considerably from the record low of 27% seen at the start of 2009, low interest rates and tight lending criteria have meant that remortgage demand has gone in the opposite direction. From January 2009, the percentage of loans for remortgage has dropped from 53% to 31% in November.

‘It is encouraging to see that mortgage interest payments are so affordable for home movers and first time buyers. But with substantial deposits still needed to secure a mortgage, the market will continue to be relatively restrained for some time to come,’ said CML director general Michael Coogan.

‘With refinancing still unattractive or unnecessary for many borrowers due to continuing low rates, we are now seeing a much more house purchase-focussed market, a profile much more like the beginning of the Noughties than its latter years,’ he added.

Meanwhile the latest figures from The Department of Communities and Local Government show that UK house prices were 0.6% higher in November than a year earlier, having leapt 1.7% since October.

Using the three-month-on-three-month measure, the value of a typical home increased by 3.5%, compared with 2.6% in the quarter to the end of August, it said. The average cost of a UK home stood at £200,454 in November, with prices showing annual rises throughout the country except Northern Ireland, where prices were down 11.6% year-on-year.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.


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