Whilst national affordability for mortgages remains steady there is now a large disparity with the capital, as buying a London property with a mortgage has hit the least affordable for a decade, according to Halifax.
The outlook is bleak for those wanting to buy property in London compared the average UK market, with mortgages becoming increasingly less affordable, however there is still a way to go before it reaches the levels seen in 2007, when the payments were 52.4% of earnings. Currently in London it sits at 47% of earnings, an 18% increase over the last 10 years. Similarly, the South East sits at 38.8% of earnings.
This has been mainly driven by rising house prices in the south of England outperforming average wage growth, and so decreasing the affordability as compared to disposable earnings. By comparison the UK average has remained about 30% of average disposable income for the past decade.
In fact, despite the decreasing affordability on the South East and London nationally the affordability levels have been increasing, with a typical mortgage in 2008 counting for 10.2% more of a homeowner’s income than today.
In fact, in Scotland the cost as a proportion of income has fallen by circa 14% and in Northern Ireland up to 20%. In the North Wear the current affordability sits at 22% and in Yorkshire and the Humber they remain low too at 22.6%.
Affordability continues to show the disparity of house prices between the south of England and the north, and points to continuing stagnation in the southern markets compared to the continued strong growth in the north. With mortgage payments in Hackney, Haringey, and Bren at an average of 61% of local earnings and Northern England and Scotland at closer to 20% the north has room to expand whereas London has hit a ceiling. This is one of the many factors pointing to slow growth in London, until at least the London wage increases in the line with the growth it has experienced.