The Stonebridge bi-monthly Mortgage Affordability Index analyses gross wage data from the Office for National Statistics (ONS), the Bank of England loan rate data and its internal data.
It found that mortgage repayments made up 36.5% of the average borrower’s salary in December, and rose to 37% in January, suggesting weaker affordability.
This was higher than the 36.3% mortgage repayments accounted for in November.
Stonebridge said this was because borrowers were taking out larger loans, as this rose 1.4% to an average of £192,114 in January. This was a larger growth than the 0.5% improvement in the average annual salary between December and January, according to ONS data.
Further, data from the Bank of England showed the average rate on new mortgages rose for the first time in five months with a 0.04% increase to 4.51%.
Shawbrook is the specialist mortgage sector’s ‘best kept secret’ – Sard
Sponsored by Shawbrook Bank
Despite this, affordability was found to be better than in December 2023, when repayments made up 42.4% of the average salary. This was higher than the long-running average of 35.9%.
Stonebridge’s Mortgage Affordability Index:
|
Month |
Mortgage repayments as a percentage of salary |
|
January 2024 |
41.9% |
|
February 2024 |
39.7% |
|
March 2024 |
38.1% |
|
April 2024 |
38.8% |
|
May 2024 |
38.8% |
|
June 2024 |
39.6% |
|
July 2024 |
40.1% |
|
August 2024 |
40.5% |
|
September 2024 |
40% |
|
October 2024 |
38.7% |
|
November 2024 |
36.3% |
|
December 2024 |
36.5% |
|
January 2025 |
37% |
|
Long-running average |
35.9% |
Tight mortgage affordability
Rob Clifford, chief executive at Stonebridge, said: “Mortgage affordability has continued to be tight for the second consecutive month as rising house prices push loan sizes higher and mortgage rates edged up. But in context, remember that affordability remains significantly better than at the start of last year, and affordability will definitely improve as rates fall in coming months.
“While the Bank of England’s Monetary Policy Committee (MPC) opted to hold rates in May, there are mounting calls for it to reduce borrowing costs further.”
He added: “Inflation remains a concern, but much of the recent increase is imported, driven by rising energy costs and a strong dollar rather than by surging domestic demand. As a result, the risk of inflation spiralling out of control again appears limited.
“At the same time, the UK economy is struggling for momentum. If growth continues to stall, the MPC may have little choice but to step in to provide support. That could lead to lower borrowing costs in the months ahead, offering much-needed relief to mortgage borrowers, who are still grappling with the impact of the cost-of-living crisis.”
