- The cost of servicing mortgages jumped in August 2005 to 18.7 per cent of borrowers household disposable income compared to 18.4 per cent in July 2005
- Annual increase is up by 0.7 per cent from August 2004 (18 per cent) to August 2005 (18.7 per cent)
- Average mortgage payment increases from £502 to £512 from July 2005 to August 2005
- London shows biggest regional increase up from 22.7 per cent (July 2005) to 23.4 per cent in August 2005
Andy Gray, head of mortgages for the Woolwich said: "Despite these increases the message to mortgage borrowers is that the cost of mortgages has been stable for some time but that we should expect the odd blip along the way."
"There are a number of reasons why there has been a jump and historically it tends to correct itself later in the year. Following the cut in interest rates at the beginning of August most variable rates were cut at the beginning of September and many people are on fixed rates which will not change, and therefore will not have impacted the August data."
"Also our own research indicates that July/August is the most popular time for people taking out new mortgages, and so there are a disproportionate number of people coming to the end of their existing term product. Many either go onto a standard variable rate or re-mortgage with products that are currently at higher rates than when they took out their original loan, or last re-mortgaged. This leads to higher payments and hence pushes the mortgage affordability ratio upwards. A similar hike occurred last year between July and August when the ratio increased by 0.4 per cent."
At a regional level all regions, with the exception of Wales (remained the same at 16.3 per cent), saw increases in August with London showing the biggest single increase to 23.4 per cent, up 0.7 of a percentage point from July 2005. However, the jump in the equivalent period of 2004 was 0.9 per cent which was later followed by a fall in the cost of servicing debt.
Other areas that saw substantial increases were the South-West with a 0.6 per cent increase to 18.8 per cent and the North-East with an increase of 0.4 per cent to 16.4 per cent but again Mr. Gray expected these to be blips rather than a long term trend.
The Woolwich Mortgage Affordability Research monitors 1.3 million Barclays Group current accounts which 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.
