Affordability blossoms for those with a 30% deposit
UK house prices are becoming increasingly affordable, especially for those who can stump up a substantial deposit.
Research from Halifax shows an improving trend over the past 18 months, in terms of the proportion of earnings spent on mortgage payments.
For new borrowers with 30% to put down, the proportion has fallen from a peak of 48% of earnings in late 2007, to 31% in the first three months of 2009. The figures compare with a long-term average of 37%.
The pattern has been repeated across the entire UK with the biggest percentage falls in Northern Ireland and London.
In a survey of 407 local authorities, the lender found 217 had experienced a stunning 25% fall in mortgage payments as a proportion of average earnings.
North Cornwall took its place as the least affordable local authority, with the average mortgage payment on a new loan in 2009 demanding 63% of average local earnings, while in Copeland, Cumbria, the proportion stood at a nationwide low of 22%.
With house prices having fallen to an average £157,000 (according to Halifax) a 30% deposit equals around £47,000.
The lender reckons that borrowers who are this well placed should be able to secure a 70% loan-to-value (LTV) deal at below 3%, whereas a buyer who needs an 85% LTV mortgage is likely to be looking at 5% and above.
Halifax chief economist, Martin Ellis, offers the following cautious comment: “The situation is improving a bit, but only for those in the position to take advantage of it.”
Last week, First Direct published research suggesting that around four million Britons are sitting on cash they want to invest in the housing market, when the time is right.
According to the firm, homeowners in the UK are holding onto an estimated £20.2 billion that could revitalise the market once prices have bottomed out.
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