Scotland’s mortgage payments best in UK

The figures from the fourth quarter of 2011 are at their lowest level for nine years, at 20 per cent, compared to 27 per cent across the rest of the country. First-time buyers and those moving house are making mortgage payments well below the long-term average of 30 per cent of their income, recorded over the past 27 years. The Bank of Scotland research found East Ayrshire is the most affordable local authority area in the UK, with typical mortgage payments accounting for 15.7 per cent of average local earnings. It is followed closely by West Dunbartonshire and North Ayrshire, both at 16.2 per cent. In all, seven of the ten most affordable local authority districts in the UK are in Scotland. Edinburgh is the least affordable area, with average mortgage payments totalling 26.2 per cent of local earnings. It is followed by Aberdeenshire at 25.9 per cent and Perth & Kinross on 25.6 per cent. But Dr John Boyle, head of research at property firm Rettie & Co, said the housing sector was still suffering despite the promising figures: “Housing affordability in Scotland has been boosted by the modest fall in house prices, reduced mortgage rates and an increase in the size of deposits being put down by buyers. “However, the high level of deposit required and restrictions on lending is making it difficult for people to get on the housing ladder, hence transaction levels remain relatively weak. “The Scottish market was not as over-stretched in terms of affordability as it was in many other parts of the UK at the height of the market, which is one reason why the correction in terms of house prices was not as severe here. Improving affordability certainly provides a boost to the housing market, but there remains a lack of market confidence due to economic uncertainty.” He added: “Improved affordability could help the market recover more quickly in Scotland when the economy improves and access to finance for mortgages is more available.” Researchers agreed that lower house prices and reduced mortgage rates have helped drive the improvement in affordability. Nitesh Patel, housing economist at Bank of Scotland, said: “The falls in house prices and cuts in mortgage rates in the last few years have resulted in a significant improvement in housing affordability for those able to raise the necessary deposit to enter the market. Mortgage payments for a typical new borrower are now at their lowest in proportion to earnings since 2002. “The marked improvement in affordability was a key factor supporting housing demand in 2011. The prospect of an exceptionally low Bank of England bank rate over the foreseeable future should maintain affordability at favourable levels in 2012. “This should support the market over the coming 12 months, helping to offset the impact of the downward pressures on demand from the ongoing difficulties faced by households regarding their finances and uncertainty about economic prospects.” The researchers said there was a “clear north/south divide” in affordability, despite improvements across the UK since 2007. Along with Scotland, Yorkshire and the Humber and Northern Ireland both had lower mortgage payments as a proportion of disposable earnings. Across the UK, mortgage payments have nearly halved as a proportion of income from their 2007 peak of 48 per cent, as house prices have dropped along with mortgage rates. Payments are highest in Greater London, at 35 per cent, and the South East at 33 per cent. A long-term average, from 1983 to 2011, finds Scotland and other northern regions at 30 per cent payments in relation to earnings. By comparison, the long-term average for the South East is 48 per cent.