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Mortgages at most affordable level in a decade

Monday, 28 February 2011 12:05 AM

New research published by Barclays has revealed that mortgages are taking the lowest proportion of Brits' salaries in ten years.

The study, which looked at the accounts of the bank's 1.3 million mortgage customers during December 2010, found that on average, homeowners currently spend 15.4 per cent of their take-home pay on their mortgage.

Barclays cited the low interest rate environment as being the main reason for this. Due to widespread belief that the Bank of England base rate will rise by June, the company has urged its customers to plan for how they will cope with rising mortgage costs.

Andy Gray, head of mortgages at Barclays, said: "It stands to reason that with interest rates at an historic low, mortgage affordability is at its best in a decade, but it is crucial that homeowners are not complacent."

Interestingly, only 13 per cent of the 1,000 homeowners polled as part of the research said they could easily afford their current mortgage repayments. However, 39 per cent said they were comfortable and had some room for manoeuvre and 28 per cent said they were stretched but had just enough disposable income to be able to cope with rising rates.

The research also found that over a third (36 per cent) of those who found their mortgages less affordable now than a year ago cited lower salaries as the main factor, and 29 per cent blamed the increasing prices of other outgoings.

Only 14 per cent of respondents said that their mortgage was their primary budgeting concern for 2011. Petrol was people's biggest worry, with 33 per cent of the vote, and 15 per cent were most concerned about rising utility bills.

Gray commented, "The cost of petrol or rising energy bills may be beyond their control, but homeowners have a golden opportunity now to ensure they have made plans to ensure their mortgage remains affordable through 2011 and beyond.

"This could be as simple as remortgaging, which could also help with their other rising household costs."

Barclays Woolwich is offering a 'Great Escape' package that allows borrowers with a mortgage of up to 80 per cent loan-to-value to switch their mortgage to Barclays with no application fee, free legal work and valuation and £300 cashback (intended to cover the exit fee levied by your current lender). To find out more, check out Barclays.co.uk/mortgages.

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