In May 2005 18.5 per cent of average household net income in England and Wales was spent on monthly mortgage payments. Although this is an increase from April’s figure of 18.3 per cent, indications suggest it has now levelled-off.
Regionally there is a stark contrast in the proportion of income used for mortgage payments. In London and the South East the proportion has fallen whereas in other areas it has continued to rise. In addition, while payments account for 22.8 per cent of net household income in London, it is just 16.2 per cent in Wales.
The research also revealed average payments have risen by 34.3 per cent in 41 months from £371 in January 2002 to £499 in May 2005. Household income also rose from £2,329 to £2,700.
Andy Gray, head of mortgages at the Woolwich, said: “The numbers show the concern expressed by commentators about affordability is probably overdone. Our data has revealed the increase in the mortgage burden has been slower and reached less dramatic levels than the house price to earnings ratio would suggest.
“This also indicates that nationally the cost of servicing a mortgage is still affordable for most. The signs are that the proporton of free income used has at least levelled-out and in some regions started to fall.”
Ray Boulger, senior technical manager at John Charcol, agreed and added that affordability was likely to improve. He said: “The worst time for affordability was last summer when prices and interest rates peaked. With wage increases, decreasing prices and the cost of fixed rates falling sharply, affordability will continue to improve.”
