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Mortgage market snapshot
publication date: Aug 13, 2010
Movers' monthly mortgage payments are the 'most affordable' they have been for 35 years. Low interest rates mean that people moving home are now paying the smallest amount of their income on mortgage payments for 35 years.
On average, people moving in May paid just 9.5 per cent of their income on mortgage interest, latest data from the Council of Mortgage Lenders has shown. Movers took out 27,100 loans, worth £4.2 billion, in May, up from 26,100, worth £4.1 billion in April and 22,900, worth £3.2 billion, in May last year.
Lending to first-time buyers also increased in May, with 14,800 loans, worth £1.8 billion. In April, there were 14,500 loans to first-time buyers, worth £1.7 billion; and a year ago there were 13,700 mortgages, worth £1.5 billion. Affordability for first-time buyers has changed little in recent months. In May, they borrowed on average 3.14 times their income and 75 per cent of the value of the property but interest payments accounted for only 13.2 per cent of their income, the lowest proportion more than six years.
Lending for house purchase showed its eleventh consecutive year-on-year increase. In May, there were 42,000 loans for house purchase, worth £6 billion, up 15 per cent in number and 28 per cent in value.
In the coming months, however, we expect year-on-year comparisons to revert to zero or perhaps even to modestly negative numbers. This is because activity in the second half of 2009 was boosted as buyers moved to take advantage of a stamp duty holiday that finished at the end of the year.
Data for comparable months this year will also show the impact of a challenging economic backdrop, with government spending cuts and tax increases.