Mortgage affordability in UK level with other countries

According to industry officials affordability on mortgages in the UK is pretty much on level with that in other countries. A study was carried out by Capital Economics, and suggested that when it came to mortgage affordability the UK was no worse off than other countries.

The company conducted research which looked at mortgage affordability in nine major Western economies, and this included Australia, Denmark, France, Ireland, Netherlands, Spain, Sweden, the USA and the UK. The average amount of take home pay that was used for mortgage repayments on a repayment mortgages in these countries came to 48 percent.

Over the past forty years the level of take home pay going on mortgage repayments in the UK has been around 50 percent. The highest level of take home pay going on mortgage repayments was found to be in Sweden, where 56 percent of pay went on mortgage repayments. The cheapest was in Spain, where 39 percent of take home pay went on mortgage repayments.

One economist involved in the research said that many may have expected the level of take home pay that was being spent on mortgage repayments in the UK to be higher due to high population density and undersupply of housing, but he stated that this was not the case.

He stated: “Our analysis shows that over the past 40 years, long-run average UK mortgage affordability is unremarkable in an international context. To our minds, this casts doubt on the popular view that a chronic undersupply of homes in the UK supports high prices.”

At present the actual level of take home pay going on mortgage repayments in the UK is 44 percent, and this comes from the record low base rate of 0.5 percent, which has reduced mortgage repayments considerably for those on variable rate mortgages.

Tags: past 40 years, Mortgage loan, record, Major, mortgage