'Mortgage freedom day' two days later than 2016, report finds

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The date by which new borrowers will have covered their annual mortgage repayments is just two days later than last year, new research has found.

Bank of Scotland has calculated that March 14 is "mortgage freedom day" for Scotland, which is the first region in the UK to reach the milestone in 2017.

The calculation is based on the average Scottish annual mortgage repayment cost of £5,134 and the average net annual income of £25,925.

Mortgage payments are calculated as a percentage of average disposable earnings, after deduction of income tax and employee's national insurance contributions.

For Scotland, this figure is 19.8%, which applied to 365 days means that, in theory, 72 days into 2017 homeowners will have earned enough to pay off the annual cost of their mortgage.

Graham Blair, mortgage director at Bank of Scotland, said: "Not many of us probably think about how many months' salary we would need to earn before we covered our mortgage payments for the whole year, but calculating the potential 'mortgage freedom day' gives a good indication of the current housing market and employment.

"In 2016, the falling cost of mortgage repayments meant Scotland's mortgage freedom day was ten days earlier than in 2015, which was good news for new borrowers.

"This year it is virtually unchanged from 2016, occurring just two days later. Although average house price grew by just under 9% during the year, mortgage rates have fallen to record lows whilst rising net earnings has helped mortgage affordability."

Home owners in West Dunbartonshire and North Lanarkshire were the first to reach their potential "mortgage freedom day" in Scotland on February 26 due to lower mortgage repayments to net earnings, Bank of Scotland said.

Local authority areas where house prices, and therefore mortgage payments, are highest have to wait the longest to reach their potential "mortgage freedom day".

Wednesday March 29 will be the last "mortgage freedom day" in Scotland for the City of Edinburgh, the day after East Lothian on March 28.

In 2016 East Lothian was the last area to reach its "mortgage freedom day".

Average mortgage payments for a new borrower - including both first-time buyers and home movers - are calculated based on average house prices and mortgage rates.