Scotland is the most affordable area in the UK
MORTGAGE payments for new borrowers have plummeted to their lowest level as a proportion of disposable earnings for 15 years, with Scotland the most affordable area in the UK, according to a new study.
Typical payments for both first-time buyers and home movers taking out a new loan north of the Border stood at 20 per cent of take-home pay in the second quarter of this year compared a UK-wide average rate of 26 per cent, the Bank of Scotland found.
Typical mortgage payments in Scotland as a proportion of earnings have fallen from 37 per cent in autumn 2007, putting the nation at the bottom of the league table alongside Northern Ireland, where payments have dropped by around two-thirds.
Along with Wales, Yorkshire and the Humber, payments in Scotland have nearly halved since the peak of the market five years ago.
Neil Harrison, marketing manager for the Edinburgh Solicitors’ Property Centre, attributed the trend to stricter lending criteria by banks, and the fact that salary levels have remaining largely constant despite the drop in house prices.
He said: “The days of someone taking out a relatively unaffordable mortgage are over, and that has helped bring this rate down. Historically, house prices in Scotland have been lower than elsewhere, and while prices are down from their peak while there hasn’t been a corresponding drop in salary levels.”
The study put the increased affordability down to static and falling house prices coupled with low mortgage rates by long-term standards as the Bank of England maintains the base rate at a historic 0.5 per cent low.
Even in London, where house prices have remained relatively strong due to strong overseas buyer demand, potential payments for a new borrower have reached around 35 per cent of disposable earnings compared with 56 per cent five years ago.
The ten most affordable areas are all in Scotland, with potential mortgage payments in East Ayrshire standing at around 15 per cent of disposable earnings.
Nitesh Patel, housing economist at Bank of Scotland, said: “Mortgage payments in Scotland account for a lower proportion of disposable earnings than anywhere else in the UK. In addition, all ten of the most affordable local authority districts are in Scotland, with East Ayrshire the most affordable.
“Lower house prices and reduced mortgage rates have led to a significant improvement in housing affordability for those able to fund the necessary deposit to enter the market over the past five years. As a result, mortgage payments for a typical new borrower currently account for the lowest proportion of earnings for ten years.
“The low level of mortgage payments in relation to income is providing support for Scottish house prices. The prospect of interest rates remaining at low levels for some time 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.”
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