Scottish mortgages are ‘more affordable’
● Average monthly payments less than 20% of disposable earnings
Scots homeowners are the best off in terms of mortgage affordability, a new report has revealed. The average mortgage payment north of the Border totalled 19.8 per cent of disposable earnings, compared to almost 30 per cent for the UK as a whole.
The report, from Bank of Scotland, shows the most affordable local authority area in Scotland – West Dunbartonshire – is also the most affordable in the UK, with mortgage payments at just 15.4 per cent of disposable income in the fourth quarter of 2016.
North Lanarkshire, East Ayrshire, Renfrewshire, Inverclyde, Stirling and Falkirk also dominate the UK’S ten most affordable council areas, with Scottish areas making up seven of the top ten Uk-wide.
However, the least affordable area of Scotland is Edinburgh, where typical mortgage payments account for 24 per cent of disposable income. The capital is followed by the Lothians and Aberdeenshire.
However, the figure is still significantly lower than it was in 2007 – a year before the recession hit – when the average mortgage took up 37.3 per cent of a household’s disposable earnings.
Graham Blair, mortgage director at Bank of Scotland, said: “Scottish homeowners have seen a decent improvement in housing affordability since 2007 as record falls in mortgage rates have offset higher house prices. As a result mortgage payments account for a lower proportion of disposable earnings than anywhere else in the UK.”
He added: “The significant reduction in mortgage payments by a typical borrower has resulted mostly from record low rates that have provided monthly savings of, on average, around £225 when compared to payments in 2007.”
Although the majority of Scottish local authorities have seen a slight increase in the amount of earnings devoted to mortgage payments when compared to the fourth quarter of 2015, mortgage affordability in Scotland has improved by 17.5 percentage points since its peak of 37.3 per cent in 2007.
Historically low mortgage rates have been the main driver behind the significant improvement in affordability since 2007.
Uk-wide, all of the least affordable areas are in London and the south-east of England.
Outside of Scotland, mortgage payments are at their lowest as a proportion of disposable earnings in Northern Ireland, the north of England, Yorkshireandthehumberand the north-west of England.
The three most affordable areas in the top ten which are not in Scotland are Copeland in Lancashire and Merthyr Tydfil and Blaenau Gwent, both in Wales.
Meanwhile, payments are highest in relation to earnings in Greater London, the south east and the south-west of England. London is the only region where current rate is above its long-term average.
In the fourth quarter of last year, the average monthly take-home wage in Scotland was £2,160 and the average monthly mortgage payment was £427.