A report published last week revealed that the sharp decline in the cost of contractor mortgages has made Scotland the most affordable place to live in the UK.
A typical Scottish borrower spends 22% of their average disposable income on their mortgage, according to research from the Bank of Scotland. The UK average is 28% and borrowers in the South East of England and London pay out more than 33% of their take home pay in mortgage costs.
Bank of England data shows that while buyers now need to put down higher deposits, up from an average 20% in 2007 to 26% today, the average mortgage rate has dropped from 5.98% to 3.85%.
Scotland now boasts six of the most affordable UK areas. In East Ayrshire, borrowers spend a mere 17.7% of their disposable income on mortgage repayments and home owners in nine other Scottish authorities spend on average less than 20% of net earnings on their mortgage. However, borrowers in Edinburgh are not so lucky, spending an average 29%.
The Bank of Scotland’s housing economist, Martin Ellis, said that lower mortgage rates and reduced house prices have boosted housing affordability north of the border since the housing market peak of 2007. Affordability should remain favourable for some time to come and this will support demand despite weak earnings growth, higher taxes and high inflation, he added.
However, for first-time buyers unable to gain access to the housing market due to high deposits and stricter lending criteria, greater affordability is no consolation.
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