Lowest mortgage payments for 13 years

Mortgage payments have fallen to their second lowest level on record, according to new figures.

Borrowers who bought a new home in November spent an average of less than 11 per cent of their income on paying the interest element of their mortgage, according to the Council of Mortgage Lenders.

The figure was the lowest level for 13 years and the second lowest since records began in 1974.

Several lenders have recently reported that house prices are rising while mortgage rates are beginning to drop as competition returns to the market.

The CML said home movers spent just 10.6 per cent of their income on paying their mortgage interest in November, the lowest figure since a brief spell in 1996 when it dropped to 10.2 per cent.

During the first few months of the credit crunch the figure stood at 17.9 per cent in December 2007, while in the previous recession it reached 28.1 per cent in the third quarter of 1990.

The CML attributed the current low level to a combination of lower mortgage rates and a change in the type of deals people took out during the month.

Only 58 per cent of borrowers opted for a fixed-rate mortgage during November, down from 66 per cent in October, while 42 per cent took out a variable rate deal.

Michelle Slade, of personal finance researchers Moneyfacts, said: “Borrowers are waiting as long as they can to take advantage of lower rates.

“It all depends on how much the Bank of England puts up rates as if it is by a small amount, borrowers may still be tempted to opt for variable deals as they will only see a small increase in their monthly repayments.”

The average rate on a two-year fixed rate deal is 4.87 per cent while on a two year tracker, it is 3.7 per cent, according to Moneyfacts.

Melanie Bien, of mortgage brokers Savills Private Finance, said: “One of the unexpected effects of the credit crunch has been the extremely low interest rate environment.

“Borrowers on variable rates have been benefiting from incredibly cheap deals and this, in turn, has kept the number of repossessions at bay. However, rates won’t stay low forever so borrowers need to remain vigilant – overpay where possible and switch to a fixed rate if necessary when rates start to rise.”

Find property online with turtlehomes.co.uk

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