Mortgage affordability at its best for 10 years says Barclays

Mortgage affordability has hit its best level for 10 years, according to new research from Barclays.

Having analysed more than one million customer accounts it found that people are currently paying 15.4% of their take home pay to cover their monthly mortgage payment – the lowest level since Barclays began the regular analysis ten years ago.

The improved affordability was attributed largely to the current low interest rate environment – the UK has had almost two years of interest rates at an all-time low of 0.5%.  Barclays said that the effect of low interest rates offset the fact that over the ten years, the average house price has increased by 68%, while the average salary has risen by just 37%.

In a supporting poll of 1,000 mortgage borrowers, the majority of people said that they are comfortable with their current mortgage payments:

  • 13% say they can easily afford their current mortgage repayments and are not worried if interest rates rise
  • 39% class themselves as comfortable, and with some room for manoeuvre
  • 28% are stretched but still have disposable income available to help them cope with rising interest rates
If you’re a home buyer or first time buyer reading this, you may be feeling buoyed by the news of improving affordability.  However, whilst this may be true for many existing borrowers (especially those who’ve been on low variable rates for the last year or two), it doesn’t necessarily mean that buying a new home has got any easier.

Mortgage lenders are still in a cautious mood and to get access to the best rates, home buyers need to be putting down a sizeable deposit – often in excess of 25%.  And while many existing borrowers have benefitted from low interest rates, affordability rules are still tight for new borrowers.

What Barclays does point out is that while many borrowers are comfortable with their mortgage repayments now, it is vital that people prepare themselves for higher interest rates and outgoings in the future. 

Not only will higher interest rates mean higher mortgage costs for borrowers not a fixed rate, but there are also rising costs on fuel, food and utilities to contend with.

Anyone concerned about being able to cope with rising costs should consider fixing their mortgage rate – this will ensure that at least a part of their overall monthly outgoing (and the largest part for most people) is fixed and it should also make budgeting easier. 

Try our rate change calculator to see how a rise interest rates could affect you and your mortgage.

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