Buyers in London and the south of England are seeing the greatest improvements in affordability as static house prices and lower mortgage rates combine to reduce costs, according to analysis from Rightmove.
The findings come ahead of the Bank of England’s interest rate decision at midday today with markets widely expecting rates to be held.
Across Great Britain, the average monthly mortgage payment for someone buying a property at the average asking price is now £1,506, compared with £1,590 a year ago – a saving of £84 a month. The average asking price for a home stands at £370,257.
The calculations are based on buyers purchasing at the average asking price, taking out a 2-year fixed-rate mortgage and spreading repayments over 30 years.
REGIONAL SHIFT
In London, where average asking prices have fallen 1.1% year on year, a typical buyer would save £181 a month compared with last year. Savings are also notable in the South East, at £120, and the South West, at £106.
By contrast, affordability improvements are more limited in Scotland, where asking prices have risen by 2.3% over the past year. Buyers there would save just £23 per month compared with last year. In the North West the monthly saving is £24, while in Yorkshire and the Humber it is £36.
The shift reflects a fall in the average 2-year fixed mortgage rate, which has dropped from 4.99% a year ago to 4.53% today.
HEATED COMPETITION
Colleen Babcock, Rightmove’s property expert, says: “Competition amongst sellers to find a buyer is more heated in London and the south of England, while higher stamp duty rates have hit these regions harder, both contributing to lower asking prices compared to last year.
“The result for buyers is improved affordability when combined with lower mortgage rates, and the higher rate of agreed sales compared to last year suggests many are taking advantage.
“However, it’s still much more expensive to purchase a home in London and the south of England compared to other areas of Great Britain, so affordability is still stretched despite the increase in purchasing power.”
APPETITE TO LEND
Matt Smith, Rightmove’s mortgage expert, adds: “We’re widely expecting a hold in the Bank Rate today.
“It will be particularly interesting to see how the Bank votes and its wider commentary around today’s decision to get a sense of how the next couple of months could play out.
“Although mortgage rates have trickled up in recent weeks as mortgage financing has become more expensive, we’re still seeing appetite from lenders to do business in what is typically a busy period for them.”
WELCOME COOLING
Mary-Lou Press, President of NAEA Propertymark, says: “Average house prices have risen by over £40,000 in only five years, and in London specifically by around £90,000 alone.
“Therefore, a cooling, especially in areas across the south, will be welcomed by many and is due, in part, to ceiling prices being met because of the stretching of affordability for many people.
“A slow tapering in interest rates has allowed lenders to introduce more competitive mortgage products and has decreased the monthly cost for those with variable or tracker mortgages, allowing them to refinance to lower rates, and making it easier for homeowners to afford larger or more expensive properties by making monthly payments cheaper.”
