Tuesday, May 26, 2009
Category:
Property
According to the first Halifax review of the affordability of housing in the UK, there has been a significant improvement since mid 2007.
This conclusion was drawn further to an assessment of home affordability within 407 local authorities, including 32 London boroughs. The assessment was conducted by means of an ‘affordability calculation’, which measures the level of difficulty faced by a prospective home buyer, and several findings came to light.
The amount of disposable income that is dedicated to mortgage payments has considerably fallen during the course of the past 18 months. The typical mortgage payment for a new borrower in the third quarter of 2007 stood at 48 percent of their average disposable earnings. However, this reduced to 31 percent in the first quarter of 2009. Mortgage payments in relation to earnings are now less than the long-term average of 37 percent, which was recorded over a period of 25 years.
Since the third quarter of 2007 affordability has improved within each of the 12 regions, with Northern Ireland and London seeing the most significant reductions in average mortgage payments as a proportion of average disposable earnings. The former experienced a drop from 63 percent to 37 percent and the latter experienced a drop of 56 percent to 34 percent. The areas in which mortgage payments account for the most minimal proportion of disposable earnings are Yorkshire & the Humber and Scotland at 26 percent.
All UK local authorities have been subject to improved levels of affordability since mid 2007 as a result of falling house prices and reduced mortgage rates. In fact, between the third quarter of 2007 and the first quarter of 2009, there has been a fall in mortgage payments as a proportion of average earnings within 217 of the 407 local authorities. This reduction has been recorded as being at least 25 percent, whereas for 6 local authorities it has been recorded as being a minimum of 40 percent.
The local authority to have experienced the greatest improvement in affordability since the third quarter of 2007 has been East Hampshire. In this area, mortgage payments as a proportion of average earnings have gone from 62 percent down to 35 percent. Following East Hampshire, Ards in Northern Ireland, West Devon and Chiltern have encountered the next greatest improvements.
In terms of the most affordable local authority in the UK, this is noted as being Copeland in Cumbria where typical mortgage payments in the first quarter of 2009 stood at 22 percent of average earnings. In second place at 23 percent came the Shetland Islands and Renfrewshire in Scotland. On the opposite end of the scale, the least affordable local authority in the UK is North Cornwall at 63 percent. Second to this is South Buckinghamshire at 62 percent, and in third place is Guildford at 58 percent. Local authorities in this category tend to be commuter areas or those in which a large number of second homeowners reside.
Housing economist at Halifax, Martin Ellis, commented: "There has been a marked improvement in housing affordability across the UK over the past 18 months. The significant reduction in mortgage payments paid by a typical homebuyer has resulted largely from the combination of the decline in house prices and the cut in interest rates to record lows. As a result, housing is at its most affordable for almost seven years. Notably, mortgage payments for a typical new borrower as a proportion of average earnings are now below the average for the past 25 years.
"Despite the improvements in affordability, conditions in the housing market are likely to be tough during the remainder of 2009. Increasing unemployment, low consumer confidence and the constraining effects of the continuing dislocation of the financial markets on the availability of mortgage finance are all likely to exert downward pressure on the market over the coming months. Prospective homebuyers should factor the likelihood of further house price falls into their calculations when deciding whether or not to buy."
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Those that have taken advantage of improved levels of affordability by getting on the property ladder, or indeed by moving up it, may wish to consider taking out a secured loan to fund any required, or purely desired,
home improvements. A secured loan could pave the way to creating that ideal living space. For some this may come in the form of a new kitchen or bathroom, whereas others may be keen to expand on their property by means of a conservatory or extension. A secured loan could even be used to landscape a neglected garden in preparation for long summer days. A secured loan is one of many options to fund home improvements.
