Halifax Report Indicates Improved Housing Affordability Compared to Last Year

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London (Parliament Politic Magazine) – According to the Halifax, a prominent division of the Lloyds Banking Group specializing in mortgages, the affordability of housing in the UK has increased when compared to the previous year. However, the current scenario still entails a considerable financial stretch due to higher mortgage rates.

The Halifax’s data reveals that the average cost of a home in the UK is now 6.7 times the average annual earnings of a full-time worker. This represents a decline from the figure of 7.3 times reported a year ago, which had marked a record high.

Affordability For Homes Remain Lower Than Pre-Pandemic Levels 

The lender attributed this improvement to a combination of falling house prices in the past year and rising earnings among workers. Nonetheless, it’s important to note that the affordability of an average home remains lower than pre-pandemic levels. Furthermore, a larger portion of individuals’ incomes is now dedicated to mortgage payments.

The Halifax’s analysis indicated that mortgage expenses typically constitute 35% of a homeowner’s income, in contrast to the 30% reported a year ago. This percentage is not far from the level observed at the outset of the 2007 financial crisis.

Kim Kinnaird, the Director of Mortgages at Halifax, commented on this trend, highlighting the substantial rise in interest rates over the past year. This increase has significantly altered financial considerations for both potential homebuyers and those seeking to remortgage their properties. 

Kinnaird emphasized that monthly mortgage payments have surged by around 20%, a noteworthy leap that holds significance during a broader period of economic strain and rising living costs.

London Suffers Least Affordable Homes, Priced at 9.3 Times Average Earnings

Halifax Reports The city of London remains at the forefront of unaffordable housing, with homes priced at a steep 9.3 times the average earnings. Consequently, mortgage payments in the city devour a substantial 49% of individuals’ earnings.

On the other end of the spectrum, the North East of England, with homes costing 4.9 times the average earnings, and Scotland, with a multiple of five times, present more affordable housing options. Notably, Inverclyde stands out as the most affordable local authority area, where homes are priced at just 2.9 times the average earnings, according to the insights provided by Halifax.

The financial information service Moneyfacts reports that the average rate for a two-year fixed mortgage deal is 6.74%, while a longer five-year deal carries a typical rate of 6.22%. These figures represent a significant increase from the ultra-low rates, often below 2%, that many homeowners enjoyed during their previous mortgage terms.The landscape of mortgage costs has undergone substantial changes, transitioning from a prolonged period of low rates spanning over a decade. The shift came as a result of the Bank of England’s sequential interest rate hikes, initiated in late 2021. 

What Are the Consequences of Missing a Mortgage Payment?

When you fail to make a mortgage payment for two or more months, you enter a state of arrears as per official terms. In this situation, your lender is obligated to treat you fairly, taking into account any requests you make regarding adjustments to your repayment structure. This might involve temporary reductions in your repayment amount.

Your lender might also provide options such as extending the mortgage term or permitting you to only cover the interest for a specific duration. It’s important to note that any such arrangements will be documented on your credit file, potentially influencing your future ability to secure loans or credit.

Read More: Students In Underprivileged Regions In The UK To Gain Advantages From Newly Established Free Schools

Housing Affordability Has Improved Over The Past Year

According to the Halifax, housing affordability has improved over the past year due to a decrease in property prices. The average cost of a typical home now stands at £286,276, compared to £293,586 a year ago.Concurrently, there has been a growth of approximately 7% in average earnings. This combination of factors has resulted in a decrease in the ratio of housing cost relative to earnings, ultimately enhancing affordability. 

However, for many individuals, particularly first-time buyers, the primary financial challenge remains the monthly mortgage repayments, especially when interest rates exceed their initial budget expectations.This holds true for a significant number of first-time buyers, despite the observed improvement in affordability. Based on the Halifax’s assessments, the standard first-time homebuyer encounters property prices that are 5.4 times their average earnings, a decline from the 5.8 times reported a year ago.

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.