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Home affordability hits 12 year high

The portion of disposable earnings devoted to mortgage payments – a key affordability measure – is at its most favourable for 12 years, according to new Halifax research.

Nationally, typical mortgage payments for a new borrower – both first-time buyers and home movers – at the historic average loan to value ratio stood at 28% in the second quarter of 2011: the lowest level since 1999 and down by almost half from a peak of 48% of average disposable earnings in 2007 Quarter 3.

Lower house prices and reduced mortgage rates have been the main drivers behind the significant  improvement in affordability. However, the average deposit put down by buyers has increased over the same period from 20% of the property value in 2007 Quarter 3 to 25% in 2011 Quarter 2.

The research also found that:

– Mortgage payments account for the lowest proportion of disposable earnings in Scotland (22%), Yorkshire & the Humber (23%) and the North West (23%).

– Six of the ten most affordable local authority districts are in Scotland. East Ayshire is the most affordable local authority district in the UK with typical mortgage payments accounting for 17.7% of average local earnings. East Ayrshire is followed closely by North Ayrshire (17.8%) and North Lanarkshire (18.0%).