Cheaper deals help low-income borrowers

Improve mortgage affordability is helping borrowers on lower incomes to climb the property ladder.

Mortgage applications surged 18% in March in response to improved affordability, according to the National Mortgage Index from Mortgage Advice Bureau (MAB), published today.

And the average salary of somebody applying for a purchase mortgage has fallen to £38,159 a year, the lowest since November 2012.

That is 2.9% lower than in February and the lowest average salary since November 2012, when the figure stood at £36,807.

The average deposit in March hit a 12-month low at £68,877, down by 3.2% from £71,169 in February.

This is the lowest figure since March 2014 and comes despite a 0.4% increase in average UK house prices in the same month.

Low deposits were accompanied by rising LTVs, which averaged 70.3% in March, up from 69.4% in February.

Improved mortgage affordability and availability has also provoked a rush in mortgage applications.

Brian Murphy, head of mortgage lending at MAB, said: “Record low mortgage rates have been hitting the headlines for several months now, but affordability has been improving in other areas too, with improved access to mortgage finance for lower income borrowers.

“House price growth has moderated in 2015 so far and average LTVs are slowly creeping up, making deposit requirements less strenuous."

Murphy said a rise in average LTVs doesn’t mean that consumers are borrowing beyond their means. “Safeguards are in place to prevent this and all applicants are thoroughly stress-tested before their mortgage is approved.

“The seasonal slowdown in mortgage activity appears to be behind us as both purchase and remortgage applicants were out in force in March, despite speculation that pre-election jitters could dampen the housing market.

“However, prospects for long-term growth could be derailed if affordability declines thanks to a shortage of properties coming on to the market.

‘This is why addressing insufficient housebuilding must be a political priority regardless of who is elected in May.”