Affordability for first time buyers improved Friday, 8th May 2009

Halifax has reported a significant improvement in the mortgage payments to earnings ratio in its latest First Time Buyer Affordability Review.

Mortgage repayments account for 31% of average income, down from a peak of 48% in 2007 and below the long-term average of 37% recorded over the past 25 years, for the average first-time buyer,.

What is more, the house price to average earnings ratio is down 26% from a peak of 5.84 in July 2007, to an estimated 4.34 in March 2009.

A leading spokeman for Halifax, Martin Ellis says: “There has been a marked improvement in housing affordability for potential first-time buyers in many parts of the UK over the past 18 months. This trend continued in the first three months of 2009. The significant reductions in house prices, relative to average earnings, has resulted largely from the decline in house prices.”

But first time buyer levels are low.

This is due to tighter lending criteria which has been reflected in “a much reduced availability in mortgages at high loan to value ratios. Conditions in the housing market are likely to be tough during the remainder of 2009 despite the improvements in affordability.”

It is expected that increasing unemployment, low consumer confidence and the turmoil in the financial markets to continue to put downward pressure on house prices during 2009 and that prospective first-time buyers should take acclunt of this when doing their calculations.