Mortgage affordability 'remains steady

Homeowners in England and Wales spend almost one fifth of their income on mortgage repayments, according to research published today.

Lender the Woolwich said that in May borrowers were paying an average of 18.5% of their take home pay to their lender. This was up on April's figure of 18.3% and equalled the figures for February this year and November 2004.

Since the lender started monitoring affordability in January 2002, the lowest level for mortgage repayments has been 15.6%, recorded in March 2002.

Its research suggests that affordability has remained steady over the past six months, with the cost of servicing a mortgage fluctuating between 18% and 18.5%.

"The mortgage affordability numbers show that the concern expressed by some commentators about affordability is probably overdone," said Andy Gray, head of mortgages for Woolwich.

"Much has been made of the current house price to earnings ratio being at a record 6.32 (up from 4.9 in the housing recession at the beginning of the 90s and the similar levels seen at the beginning of 2002 when our data set began).

"However, our data shows the increase in the mortgage burden has been slower."

The research painted a mixed picture with homeowners in some areas facing higher mortgage bills, and others seeing the cost of their loans fall. While repayments in Wales reached the highest level since the survey began, reaching 16.2% of salaries, in London, they have fallen, from 23.2% of income in November 2004 to 22.8% at the end of May.

Mr Gray said: "The signs are that the cost of servicing mortgages has at least levelled out and in some regions started to fall.

"This would suggest that if there are no further base rate increases, and with little house price inflation, there should start to be a fall in mortgage servicing costs relaxing the current strain on consumers' pockets and potentially adding a boost to other areas of the economy, such as retail sales."

The figures are based on the accounts of 1.3 million customers of Barclays and the Woolwich who receive a monthly income and make mortgage repayments from the same account.

Yesterday property website Rightmove said homeowners were spending around 40% of their gross monthly income on mortgage repayments but that the figure was set to fall as incomes increased.

It said the increase in average earnings had outstripped house price inflation over the past 12 months. In June house prices were up 2.4% on last years' figures, while average wages had increased by 4.6%.