Analysis by property agent comparability website, GetAgent.co.uk, has revealed that the proportion of disposable family revenue required to cowl the typical mortgage compensation is at by far its highest in a decade, hitting 27.6% to this point in 2022.
GetAgent analysed the typical annual value of a mortgage compensation based mostly on a 3 12 months mounted mortgage at a 75% mortgage to worth and what this equates to as a proportion of the typical households annual disposable revenue.
The analysis exhibits that whereas rising rates of interest have began to drive up the typical mortgage fee obtainable, the present fee of 1.93% stays significantly decrease than the three.92% common seen in 2021. On the similar time, the typical degree of disposable family revenue has additionally elevated from £43,175 in 2012 to £38,108 in the present day.
However regardless of this, the share of family revenue required to cowl mortgage prices has climbed significantly, pushed by a 65% improve within the common home worth over the past 10 years.
In 2012, a 3 12 months mounted fee mortgage at a mortgage to worth of 75% and the typical fee on the time of three.92% would have seen homebuyers repaying £7,940 per 12 months. With the typical family revenue coming in at £34,175, this meant that 23.2% was required to cowl the annual value of their mortgage.
In 2021, the typical mortgage fee for a 3 12 months mounted product was at a decade low at 1.55%. However with home costs hitting £259,1871, the typical homebuyer was repaying £9,384 per 12 months on their mortgage. Whereas the typical family revenue had additionally elevated to £37,622, this mortgage compensation value required 24.9% of the typical households disposable revenue – the very best degree seen since 2012.
To this point in 2022, not solely has the typical home worth elevated to £277,539, however a string of base fee will increase has additionally pushed up the typical mortgage fee on a 3 12 months mounted product to 1.93%.
Though the typical degree of disposable family revenue is forecast to climb to its highest in a decade (£38,108), the proportion required to cowl the annual value of a mortgage at the moment sits at 27.6% – by far the very best proportion within the final 10 years.
Co-founder and CEO of GetAgent.co.uk, Colby Quick, commented: “We’ve now seen numerous rate of interest hikes in fast succession and it will understandably come as a fear to the nation’s homebuyers, who can be dealing with increased mortgage prices consequently.
Nevertheless, this isn’t the driving issue behind an absence of housing market affordability and, in truth, the price of borrowing stays low when in comparison with the charges seen a decade in the past. On the similar time, the typical family is benefitting from a better degree of disposable revenue, however regardless of this, a bigger proportion is required to cowl the price of a mortgage.
This improve is being pushed by home worth inflation, with the typical purchaser paying virtually £109,000 greater than they have been 10 years in the past.
Sadly for these struggling to climb the ladder, there’s at the moment no finish in sight the place the pandemic home worth increase is anxious and it’s solely doubtless that mortgage charges will proceed to climb for the foreseeable future.”