Mortgage blog: Why home loans are at their most affordable since the 1990s

Posted 30 August 2013

A new study by Britain's largest mortgage lender has found that mortgages are now at their most affordable level since the 1990s. The research from Halifax has found that home loan repayments now take up a lower portion of the average income than at any time since 1999, driven by falling mortgage rates.

However, while mortgages are now at their most affordable in 14 years, many experts are warning that it is only a matter of time before interest rates start to rise. First-time buyers are being urged to be cautious in committing to a large mortgage without understanding that they will have to pay more when rates increase.

Mortgages become more affordable - but beware future rate rises

The Halifax Affordability Review shows that mortgage payments accounted for just 27% of a new borrower's disposable income between April and June this year, down from a peak of 48% of income in the third quarter of 2007.

The Daily Telegraph reports that "there have been significant improvements in affordability in all local authority districts across the UK since 2007".

The Halifax study also shows that there is a clear north-south divide. Mortgage payments account for just 17% of disposable income in Northern Ireland, 19% in Scotland and 23% in the North West. However, borrowers in Greater London pay an average of 36% of income on their mortgage compared to 34% in the South East and 32% in the South West.

Craig McKinlay, mortgage director at Halifax, says: "The favourable mortgage affordability position is a boost for both those who already have a mortgage and those who are able to raise the required deposit to buy a home. Improved mortgage affordability has been a key factor supporting housing demand and is helping to stimulate the modest recovery that we are currently seeing."

However, many experts have warned that rises in ‘swap rates' - the rate at which banks lend to one another - means that mortgage rates are set to rise.

"Anyone committing to a mortgage now is effectively going to get the best deal they will probably ever have," says Keith Osborne, editor of "So, you have to consider whether you can afford your mortgage payments when rates inevitably start to rise. Taking a long-term fixed rate may be the best way that you can insure yourself against rate rises - at least for the first five years."

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