Mortgages are now “more affordable than they have ever been”

Mortgages are now more affordable than at any other time in history, according to the latest official data. New figures from the Council of Mortgage Lenders show that the average homeowner spent a lower proportion of their income on their mortgage repayments than ever before, representing an historic low. Figures also show that lending has risen year-on-year.

The latest Council of Mortgage Lenders (CML) figures show that the average homeowner - excluding first time buyers - spend 17.7% of their monthly income on their mortgage repayments in September. Eight years ago, when interest rates were higher, the average person spent 23.7% of their income on their home loan repayments.

First-time buyers are spending 17.8% of their income servicing their mortgages, compared with 24.7% in November 2007.

The CML said the figures represented an historic low, and should help more people to buy their own home.

Mortgages have become more affordable since the Bank of England's decision to cut base rates to 0.25% in August, which resulted in many lenders cutting mortgage rates further. Recently, the Yorkshire Building Society launched the lowest ever nationally-available mortgage rate at just 0.98%.

According to the industry body, the proportion of household income being spent on repayments would have been even higher in the 1970s and 80s, when interest rates were as high as 17%.

Paul Smee, the director general of the CML, says: "Mortgage affordability reached an historic low in September, for both first-time buyers and home movers, which partly reflects the re-pricing of mortgages following August's base rate cut. This should help turn strong appetite for homeownership into a reality as we approach the closing months of the year."

The latest data showed that homeowners borrowed £11.4bn for house purchase in September 2016, up 4% on the same month last year. They took out 62,900 loans, up 3% on September 2015. Remortgage activity was up 8% compared to a year ago at £5.9bn. 2% more remortgage loans were advanced in September compared to a year ago.

Smee adds: “House purchase activity appears to have steadied, we may not be seeing huge increases in activity on the scale of 2013-14 but there is a consistency in the levels in recent months. Six months on since the stamp duty changes on second properties and buy-to-let continues to operate at lower levels than a year ago. But lending for buy-to-let house purchase and remortgaging has settled at its current level over the last four months.”