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Mortgage affordability at highest level since 2002

By Martin Fagan

Brits spending less on mortgage repayments and remortgaging to cheaper deals up by a third, according to CML.

Despite widespread gloom in the housing market, homeowners are spending less on their mortgage repayments than ever before, according to the latest data from the Council of Mortgage Lenders (CML).

During August, home-owning Brits spent on average 9.4% of their income on mortgage interest payments - the lowest since monthly records began in 2002.

Remortgaging continued to increase in August, with 34,100 loans taken out (worth £4.2 billion) - both the volume and value were more than 30% higher than August 2010.

While affordability and remortgaging hit new heights, the CML’s data also revealed first-time buyers continued to put down on average 20% of their property’s value as a deposit and borrowed 3.2 times their income, up slightly from 3.17 times in July. In August, 96% of first-time buyers took out a repayment mortgage.

"Even though it is impossible to ignore the knocks to confidence emanating from the eurozone, August lending showed welcome signs of life,” said Paul Smee, director general of the CML.

“With those moving house experiencing a record low in the proportion of their income needed to pay their mortgage interest, it’s clear the low rate environment is a benefit to those with mortgages, even against the backdrop of the gloom in the wider economy."

But the CML’s acknowledgement that fears over UK and European economies were knocking confidence in the housing market is echoed in a separate survey by the Royal Institution of Chartered Surveyors (RICS).

RICS members have reported that fewer vendors put their homes up for sale during September, as fears over the economy continued to impact negatively on the housing market.

Despite this, new buyer enquiries actually increased marginally during September, as 3% more chartered surveyors reported an increase rather than decrease in demand.

Commenting on the survey, RICS housing spokesperson, Michael Newey said: “A falling supply of fresh stock is indicative of general fears overhanging the economy, with many potential sellers preferring to stay put for now.

“As a result, the UK housing market remains pretty flat with activity level generally subdued.”

However, although RICS’ surveyors noted that more mortgage products are becoming available, the large deposits required by lenders continue to act as a barrier for many would-be buyers.