Mortgage costs reach record low

Posted by Simon Hadley in Mortgages on 16 November 2016 - Simon is a Credit Analyst at checkmyfile.

The cost of obtaining a mortgage could be in reach for first-time buyers, as rates drop to a record low.

Figures released by the Council of Mortgage Lenders (CML) confirm first-time buyers paid an average of 17.8% of their monthly household income towards mortgage repayments in September, while home movers paid just 17.7%.

This is down 0.2% from August and 0.5% year-on-year. The competitive nature of lenders to attract first-time buyers has contributed to the five-year fixed-rates being pushed below the base line.

Paul Smee of the CML says: “Mortgage affordability reached an historic low in September, for both first-time buyers and home movers, which partly reflects the re-pricing of mortgages following August's base rate cut. This should help turn strong appetite for home-ownership into a reality as we approach the closing months of the year."

Homeowners borrowed £11.4bn for house purchases in September, down 7% from previous months, but a rise of 4% year-on-year. First-time buyers were responsible for over a third of this amount, borrowing £4.9bn.

A breakdown of the figures suggests that the average loan amount for first-time buyers in September was £133,000, down £3,400 from August.

Remortgaging is down 7% to £5.5bn in comparison to the last couple of months, but the figure is 8% higher in contrast to this time last year.

Landlords, meanwhile, borrowed just £2.8bn, which amounts to a drop of 22% year-on-year. Buy-to-let lending continues to be affected by the stamp duty increase which was introduced in April. As part of this tax, a homeowner is required to pay a 3% stamp duty surcharge if they are buying an additional property.

“Six months on since the stamp duty changes on second properties and buy-to-let continues to operate at lower levels than a year ago. But lending for buy-to-let house purchase and re-mortgaging has settled at its current level over the last four months,” explains Mr Smee.

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