Mortgages in the UK have reached their most affordable level in a decade, according to new research from Halifax, despite house prices rising by 3% in the past year.

In Q4 2017, mortgage payments accounted for 29% of homeowners’ disposable income, whereas they accounted for 48% in Q3 2007. These figures indicate that mortgage affordability levels for first-time buyers and homeowners have dropped by 40% since the peak in 2007.

Halifax stated that the “significant” improvement in affordability has been driven by “historically low” mortgage rates, despite an increase in base rate for the first time in ten years last November.

Halifax mortgage director Andy Bickers commented: “This is a real boost for both those who already have a mortgage and those preparing to take their first step on to the property ladder. Improved mortgage affordability has been a key factor supporting housing demand and helping to stimulate the modest recovery that we are currently seeing.

"In recent months we have seen the number of first-time buyers and homeowners purchasing a home with a mortgage bounce back towards 2007 levels, and mortgage payments becoming a much smaller proportion of disposable income across most of the country will also support a healthy market with more choice and opportunity for buyers/borrowers.”

There has been a great deal of improvement in affordability across most local authority districts since 2007, with mortgage payments falling by at least 30% as a proportion of average earnings in 35 areas.

There has been an improvement of 15 percentage points over the period in 74% of all districts, with Northern Ireland seeing the largest improvement due to a huge fall in house prices, dropping 44% lower than in 2007.

As a percentage of homeowners’ disposable income, Northern Ireland, Scotland and Yorkshire have seen the greatest improvement at 19%, 20% and 23% respectively. However, in Greater London 45% of homeowners’ disposable income is used for mortgage payments and 40% in the South East, showing significant differences in house prices in the North and South.

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