Mortgage-to-pay ratio leaps again

Survey Conducted by Woolwich - 8th September 2006

The cost of servicing mortgages across England and Wales increased to £546 or 19% of household take-home pay in August 2006 - and this does not include increased costs due to August’s base rate increase which will filter through to mortgage payments in September 2006 - according to the latest figures from the Woolwich mortgage affordability research.

The increase in costs take it to the highest level since Woolwich first started monitoring affordability in 2002, up from 18.8% in July 2006. It can be attributed to a number of factors including higher rates for fixed rate mortgages and the buoyant property market this year, particularly in London where affordability costs went up to a new high of 23.5% this August.

Andy Gray, head of mortgages for the Woolwich said: "Increasing house prices, a buoyant summer market and the higher cost of fixed rates are having an impact on affordability."

"With the increase in base rates in August yet to filter through the cost of borrowing still has some way to go and it will become increasingly questionable whether another increase in interest rates is needed as the steam already seems to be coming out of the market."

All areas of the country with the exception of the South-West (decrease of 0.2%) and the West Midlands (no change) have seen affordability get worse in August with the biggest rises in London, the North West and Wales which all saw increases of 0.4% over the month.

Holborn and St Pancras in London remains the least affordable place in the country with 31.2% of take home household pay spent on mortgage payments. Camberwell and Peckham is second (30.5%) and Hackney South and Shoreditch third (30.1%).

Outside London, Oxford East is the least affordable area with 26.2% of earnings spent on mortgages. Staffordshire Moorlands remains the most affordable area to live in with 12.9% of earnings spent on repayments.

The Woolwich Mortgage Affordability Research monitors 1.3 million Barclays Group current accounts that have both income and mortgage payment activity on them each month. The scale and diversity of the sample gives a very good representation of mortgage affordability across England Wales.