The United Kingdom’s largest mortgage lender, Halifax, a division of Lloyds Banking Group, has reported improved housing affordability compared to a year ago, although elevated mortgage rates continue to pose challenges.
According to Halifax, the cost of a typical home in the UK is now 6.7 times the average annual earnings of a full-time worker. This marks a decline from the previous year’s figure of 7.3 times, which had reached a record level.
The lender noted that over the past year, house prices have declined while earnings have risen, contributing to this improved affordability index. Nevertheless, despite this positive trend, a typical home still remains less affordable than it was prior to the onset of the pandemic, and mortgages continue to exert pressure on households’ financial commitments.
Halifax further revealed that mortgage payments now account for approximately 35% of a homeowner’s income, which is an increase from 30% over the course of a year. This proportion is notably close to the levels observed at the outset of the global financial crisis in 2007.
Kim Kinnaird, the Mortgages Director at Halifax, acknowledged the shift in dynamics over the past year, driven by a significant rise in interest rates. Kinnaird noted, “The sharp rise seen in interest rates over the last year has meant the sums now look very different for both homebuyers and those looking to remortgage. Typical monthly mortgage payments are up by around a fifth, which is a big jump at any time, but particularly during a wider cost of living squeeze.”
The evolving landscape of housing affordability and mortgage dynamics underscores the intricate balance between market forces, economic conditions, and the financial well-being of homeowners.
