Mortgage payments accounted for 40.1% of the average borrower’s salary in September, the third month in a row this figure exceeded 40%, Stonebridge reveals.
The mortgage and protection network’s inaugural Mortgage Affordability Index found that the proportion of borrowers’ income taken up by mortgage payments is currently near its highest level in a year.
Stonebridge explains that this is due largely to a combination of rising house prices and higher borrowing costs.
While affordability did improve slightly in September, from 40.6% in August, mortgage repayments continue to take up a far larger proportion of borrowers’ salaries than they have done historically with the long-running average sitting at 35.9%.
Stonebridge data found that rising house prices were cancelling out any benefits gained from the gradual reduction in mortgage rates over the past few months.
The average rate on newly drawn mortgages fell from 4.86% to 4.78% between August and September, according to the Bank of England.
However, Stonebridge’s internal data shows the average loan size rose to a 27-month high of £198,383 the same month – due to rising house prices – resulting in only a marginal affordability boost for borrowers.
Stonebridge chief executive officer Rob Clifford says: “While the Bank of England has started to cut interest rates again, it’s clear from the data that most borrowers are yet to see the benefits from reduced borrowing costs.”
“With house prices still rising and mortgage rates elevated, homeowners are now spending more than two-fifths of their salary on mortgage payments – well above the historical average. This highlights that the cost-of-living squeeze is far from over for millions of households.”
“The good news is that we’re likely past the worst, with the Bank of England likely to continue cutting interest rates throughout 2025. As we go into 2025, we expect that to filter through to borrowers in the form of lower mortgage rates, which will provide relief for millions of households.”
Publisher: Source link
