Mortgage affordability at record low: CML

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Mortgage costs for first-time buyers and home movers reached record low points in September, according to the Council of Mortgage Lenders.

In September, first-time buyers paid  an average of 17.8 per cent of household income to service capital and interest rates.

This is down 0.2 per cent from August 2016 and 0.5 per cent year-on-year.

Home movers now pay 17.7 per cent of their household income to service mortgage costs.

This is down 0.2 per cent from August 2016 and down 0.4 per cent on September 2015.

CML director general Paul Smee says: “Mortgage affordability reached an historic low in September, for both first-time buyers and home movers, which partly reflects the re-pricing of mortgages following August’s base rate cut.

“This should help turn strong appetite for home-ownership into a reality as we approach the closing months of the year.”

The average loan size for first-time buyers fell to £133,000 in September from £136,400 in August.

The average household income also decreased slightly from £41,000 in August to £40,200 in September.

This meant the income multiple was slightly down from 3.56 to 3.53.

The average amount borrowed by home movers in the UK also decreased to £171,000 in September from £175,000 in August, while the average home mover household income also decreased to £55,100 from £55,400.

The income multiple for the average home mover went from 3.27 to 3.26 month-on-month.

However, while there was a fall in house purchase lending in September compared to August, this is the highest volume of loans and most amount borrowed in the month of September since September 2007.

This was mirrored in first-time buyer trends as this was the highest volume of loans in the month of September since September 2006.

First-time buyers borrowed £4.9bn, down 4 per cent on August but up 14 per cent on September last year.

This equated to 31,500 loans, down 1 per cent month-on-month but up 13 per cent year-on-year.

Remortgaging hit £5.5bn in September, down 7 per cent on August but up 8 per cent compared to last September. This represents 31,500 loans, down 10 per cent month-on-month but up 2 per cent year-on-year.

Legal & General Mortgage Club director Jeremy Duncombe says: “ It is encouraging to see that remortgaging figures are continuing to rise on an annual basis.

“These figures show that borrowers are beginning to regain control of the housing market and make it work for them, as they continue to take advantage of the record low base rate.

“Lending to first time buyers is following this trend set by remortgaging and is also continuing to rise year on year.”

Home movers borrowed £6.5bn in September, down 9 per cent on August and down 3 per cent compared to September 2015.

This represents 31,400 loans, down 8 per cent month-on-month and down 5 per cent on last September.

Landlords borrowed £2.8bn in September 2016, down 7 per cent month-on-month and 22 per cent year-on-year.

This came to 18,200 loans in total, down 6 per cent compared to August and 26 per cent compared to September 2015.

SPF Private Clients chief executive Mark Harris says: “It was steady as she goes for September with borrowers getting on with it and securing mortgage deals at rock-bottom rates.

“The cut in base rate in August further pushed mortgage rates, which were already at historic lows, down further still and with lenders keen to do business before the end of the year, the flurry in cheap mortgage products looks unlikely to change anytime soon.”

But Harris adds that rising swap rates could affect future borrowers.

He says: “This may feed through to higher mortgage rates in the short term, although the dip in inflation today may lead to another fall in swaps. The advice to borrowers who have their eye on a cheap rate is to secure it while they can – they are so low anyway, it is unlikely to be a move you will regret.”