Mortgage affordability is best on record, say lenders

Buy-to-let lending has also been affected by the stamp duty hike

Updated: 

Mortgage affordability has reached its best levels on record, according to lenders' analysis of new borrowing.

First-time buyers were typically putting 17.8% of their monthly household income towards paying off their mortgage in September, according to the Council of Mortgage Lenders (CML). The figure, which includes capital and interest repayments, is the lowest percentage seen since the CML's records started in 2005.

Mortgage costs for home movers also reached a historic low in September, with repayments typically taking up 17.7% of their monthly household income on average.

Low interest rates are keeping mortgage costs relatively affordable, despite the sharp house price increases seen in some parts of the UK in recent years.

Paul Smee, director general of the CML, said the latest figures reflect the Bank of England's recent cut in the base rate to 0.25%. Lenders have slashed many of the mortgage rates available following the cut.

Mr Smee said: "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 CML's figures also showed that homeowners borrowed a total of £11.4 billion for house purchases in September, down by 7% month-on-month but up by 4% year-on-year.

First-time buyers borrowed £4.9 billion, down by 4% on August but up by 14% on September 2015.

Buy-to-let lending was also showing signs of continuing to be affected by a stamp duty hike for this sector, which came into force in April.

Landlords borrowed £2.8 billion in September, down by 7% month-on-month and by 22% year-on-year.

Mr Smee continued: "House purchase activity appears to have steadied, we may not be seeing huge increases in activity on the scale of 2013-14 but there is a consistency in the levels in recent months."

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