The cost of mortgage repayments for homeowners buying a new property hit a 13-year low during November, figures showed today.
Former owner-occupiers who bought a new home during the month needed to spend an average of just 10.6 per cent of their income on mortgage interest, down from 11.1 per cent in October, according to the Council of Mortgage Lenders.
The group said the figure was the lowest since 1996, when the level of income spent on mortgage interest briefly dropped to 10.2 per cent, but other than that it was the lowest debt servicing burden since its records began in 1974.
It attributed the increase in affordability to mortgage rates continuing to fall as competition returned to the market, as well as a change in the type of mortgage people were opting for, with increased numbers taking out variable rate deals, which currently have lower rates than fixed rate loans.
Only 58 per cent of borrowers opted for a fixed rate mortgage during November, down from 66 per cent in October, with 42 per cent taking out a variable rate one.
There was also an improvement in affordability for first-time buyers, although this was less dramatic.
The average person buying their first home during November spent 14.4 per cent of their pay on mortgage interest, down from 15.1 per cent in October and the lowest figure since May 2004.
But first-time buyers continued to put down average deposits of 25 per cent of their home's value for the 10th consecutive month.
Despite the increase in affordability, overall mortgage lending still suffered its traditional seasonal dip in November.
Around 53,000 mortgages were advanced to people buying a home during the month, 4 per cent fewer than in October but still 66 per cent up on November 2008.
Within this there was a 2 per cent drop in the number of first-time buyers purchasing a property with a mortgage during the month at 19,300, although this was still two-thirds higher than it had been 12 months earlier.
But the number of people remortgaging remained subdued at just 31,000, 6 per cent less than in October and 39 per cent down on November 2008, as the low rates people revert to when their existing deal ends continued to act as a deterrent to switching.
Overall, mortgages for people buying a property accounted for 60 per cent of all lending during the month, the highest proportion since 2001 and well up on the 27 per cent it stood at in January last year.
Michael Coogan, director general of the CML, said: "It is encouraging to see that mortgage interest payments are so affordable for home movers and first-time buyers.
"But with substantial deposits still needed to secure a mortgage, the market will continue to be relatively restrained for some time to come.
"With refinancing still unattractive or unnecessary for many borrowers due to continuing low rates, we are now seeing a much more house purchase-focussed market, a profile much more like the beginning of the Noughties than its latter years."Reuse content