Mortgage affordability at best for 10 years

In an analysis of more than one million customers’ accounts, it found that, on average, people paid out 15.4% of their take home pay at the end of December 2010 to cover their monthly mortgage payment, the lowest level registered as part of the analysis, which is now in its tenth year.

The trend, attributed largely to the low interest rate environment, is despite the average house price having increased by 68% over the same period and the average salary increasing by just 37%.

Supporting opinion research commissioned by Barclays found the majority of homeowners say they are comfortable with their current payment levels.

The poll found that 13% say they can easily afford their current mortgage repayments and are not worried if interest rates rise; 39% class themselves as comfortable, and with some room for manoeuvre, and 28% are stretched but still have disposable income available to help them navigate a rising interest rate environment.

Of those who said their mortgage was actually less affordable than a year ago, over a third (36%) cited lower salaries as the main cause, while an additional 29% said their other outgoings had increased.

Yet with commentators predicting an uplift in interest rates this year – and 74% of those polled agreeing that interest rates will increase in 2011 – Barclays is urging homeowners to ensure they keep their mortgage repayment levels under review.

Andy Gray, head of mortgages at Barclays, said: "It stands to reason that with interest rates at an historic low, mortgage affordability is at its best in a decade, but it is crucial that homeowners are not complacent. When asked specifically about coping with rising interest rates, it was great to hear that 71% say they either already have a plan in place to manage increased monthly mortgage repayments, or that they will be unaffected as they are on fixed rates.

"But homeowners who are not already thinking about their mortgage certainly need to be, to ensure they have a contingency plan when interest rates start to increase."

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