Mortgage affordability hits best level in 10 years

Mortgage affordability has reached its best level in 10 years, according to research from Barclays.

Analysis of over one million customers’ accounts by the bank found that, on average, people paid out 15.4% of their take-home pay at the end of December 2010 to cover their monthly mortgage payment.

This is the lowest level ever registered by the study, which is now in its tenth year.

Supporting research by Barclays shows 13% of those with a mortgage say they can easily afford their current repayments, 39% are comfortable and 28% are stretched but still have disposable income to help them navigate a potential rise in interest rates.

However, as commentators believe a hike in interest rates to be likely this year, Barclays is urging homeowners to keep their mortgage repayments under review.

Andy Gray, head of mortgages at Barclays, says: “It stands to reason that with interest rates at an historic low, mortgage affordability is at its best in a decade, but it is crucial that homeowners are not complacent.

“When asked specifically about coping with rising interest rates, it was great to hear that 71% say they either already have a plan in place to manage increased monthly mortgage repayments, or that they will be unaffected as they are on fixed rates.

“But homeowners who are not already thinking about their mortgage certainly need to be, to ensure they have a contingency plan when interest rates start to increase.”