‘Home affordability at 12-year high’

There has also been a modest decline over the past year from 30% in 2010 Quarter 2, reducing mortgage payments relative to earnings further below the average of 37% recorded over the past 27 years.

Lower house prices and reduced mortgage rates – which have fallen since 2007 from an average of 5.84% to 3.85% – have been the main drivers behind the significant improvement in affordability. However, the average deposit put down by buyers has increased over the same period from 20% of the property value in 2007 Quarter 3 to 25% in 2011 Quarter 2.

All 12 regions have experienced the improvement in affordability since mid 2007 with affordability better than the long-term average in all regions. The most substantial percentage falls in average mortgage payments as a proportion of average disposable earnings have been in Northern Ireland (-62%) and Wales (-45%).

Locally, the fall in house prices and mortgage rates have also led to improvements in affordability in all local authority districts since 2007.  Sixteen areas have recorded an improvement of 50% or more. The overwhelming majority – 94% – have seen a fall in mortgage payments as a proportion of average earnings of at least 25%.

Eight of the ten local areas that have experienced the biggest improvement in affordability since mid 2007 are in Northern Ireland. Carrickfergus has seen the biggest percentage improvement in mortgage payments as a percentage of average earnings (-63%) followed by Castlereagh (-62%) and Craigavon (-61%). Corby and Forest Heath are the other two areas in the top ten.

Martin Ellis, housing economist at Halifax said: "Lower house prices and reduced mortgage rates have resulted in a substantial improvement in housing affordability since the peak of the housing market in 2007.  Housing is now at its most affordable for 12 years, and mortgage payments for a typical new borrower, compared to average earnings, are now comfortably below the long-term average.

"The improvement in affordability has been an important factor supporting housing demand this year. With the prospect of continuing low rates for some time yet, affordability is likely to remain favourable.  These affordability gains, together with a slowly improving economy, should help to support demand in the face of pressures from weak earnings growth, relatively high inflation and higher taxes."

Other Key Facts

* Mortgage payments account for the lowest proportion of disposable earnings in Scotland (22%), Yorkshire & the Humber (23%) and the North West (23%).
* Six of the ten most affordable local authority districts are in Scotland. East Ayshire is the most affordable local authority district in the UK with typical mortgage payments accounting for 17.7% of average local earnings.  East Ayrshire is followed closely by North Ayrshire (17.8%) and North Lanarkshire (18.0%).
* Kensington and Chelsea is the least affordable local authority district in the country with average mortgage payments on a new loan accounting for 75% of average local earnings. Mole Valley (54%) and South Buckinghamshire (51%) both in the South East are the next least affordable.

Have your say on this story using the comment section below