New borrowers now pay lowest proportion of income for 15 years

New borrowers are parting with the lowest proportion of their disposable income in order to meet mortgage payments for 15 years, according to research by Halifax.

First-time buyers and homemovers, based on the average LTV ratio, were having to devote 26 per cent of their disposable income in order to meet mortgage payments in the second quarter of 2012.

The long-term average of 36.1 per cent while the figure was 29 per cent in the second quarter of 2011.

Halifax housing economist Martin Ellis says: “The relatively low level of mortgage payments in relation to income is providing support for house prices. The prospect of interest rates remaining at low levels for sometime yet is expected to continue to be a key factor supporting the demand for homes, helping to keep house prices around their current level during the remainder of 2012.”

The 10 most affordable local authority districts are in Scotland while the 10 least affordable are in southern England. Kensington and Chelsea is the least affordable local authority district in the country with average mortgage payments on a new loan accounting for 77% of average local earnings.

Chadney Bulgin mortgage partner Jonathan Clark says that while house prices are currently not the lowest they have been over the last 15 years, they have clearly stalled. Meanwhile, income growth over the last years 15 years income growth

“It is partly got to do with criteria. Whereas 10 years ago, you could borrow five or six times your salary on a 125 per cent mortgage, you just can’t do that anymore. I suspect these figures are slightly distorted by the fact that, in the past people were borrowing 90 to 95 per cent or even more, these days it is generally not possible to borrow more than 90 per cent.

“First-time buyers are also required to have a more substantial deposit. Less of a mortgage results in smaller payments and much lower interest rates.”