Affordability actually improving insists mortgage bro...

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24 July 2015

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Affordability actually improving insists mortgage broker

The average salary of buyers seeking a mortgage fell to a near-four year low in June according to the Mortgage Advice Bureau.

Twelve months ago, the average primary salary of mortgage applicants peaked at £41,106 following the introduction of the Mortgage Market Review a few weeks earlier.

In comparison, the typical primary income for a borrower in June 2015 was just £34,584 - this is an annual fall of 16 per cent and the lowest figure seen since August 2011.

This comes despite a six per cent increase in the size of the average purchase deposit since June 2014. Purchase applicants put forward an average deposit of £75,625 in June 2015, up from £71,474 year-on-year.

As a result, average loan-to-values have fallen slightly from 69.8 per cent in June 2014 to 69.2 per cent last month, as buyers borrow less in relative terms and shoulder more of the cost of their purchase themselves.

However, the typical purchase deposit represented 1.74 times the average buyer’s primary salary in June 2014 – this has since risen to 2.19 times salary.

MAB says that following a recommendation from the Bank of England’s Financial Policy Committee last year, household finances are already being stress tested against a 3.0 per cent base rate hike when applying for a mortgage.

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- John Bamonte
- 24 July 2015 10:07 AM
Well at least it's fallen but £34,000 is still nowhere near the average salary, so 'affordable' seems pretty tenuous here.

- Jon Tarrey
- 24 July 2015 14:49 PM
Affordability improving? That's the biggest joke I've heard all day! Pull the other one, Mortgage Advice Bureau, you're kidding no-one.

- Karl Knipe
- 24 July 2015 15:03 PM
While this is a promising sign, it doesn't follow that buying a house is suddenly more affordable. Buyers, particularly younger buyers, are finding it difficult to scrape together large deposits and are being put off by very high house prices. Also, with the Mortgage Market Review measures in place, there are more barriers in the way for people looking to acquire a mortgage.

People with lower salaries finding it easier to get mortgages is good news, but getting a mortgage is only part of the buying process and the other elements are still proving very tricky or unaffordable. We need to take further steps to make house prices more affordable - which will increase the number of transactions being made and give us a more stable market, brilliant news for us agents. This is a step in the right direction, but we shouldn't be jumping for joy just yet.

- Karl Knipe
- 24 July 2015 15:05 PM
Agreed, John. £34,000 might be the average salary in London - and even that's debatable - but in the rest of the country it's unlikely to be that high. Of course, if houses prices are way, way above average wages, we're going to have an affordability issue, even if the average income needed to acquire a mortgage is now lower.