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UK mortgages in 2011 were most affordable on record

In an analysis of more than one million customers' accounts it found that, on average, people paid out 15.4% of their take home pay last year to cover their monthly mortgage payments, compared to 2008 when it reached its highest point at 20.5%.

The lowest point since records began 10 years ago was in September 2011 when the average mortgage payment fell to 15.2%, or £488 a month.

These figures support opinion research commissioned by Barclays that found the majority of home owners say they are more comfortable with their current payment levels compared to this time last year.
The poll of UK homeowners found that 83% have room for manoeuvre should their circumstances or interest rates change and 64% find their mortgage affordable, compared to 52% this time last year.

Fewer home owners think interest rates will increase this year. Just 40% think interest rates will rise in 2012, compared to 74% who were asked at the beginning of 2011 about the year ahead. A quarter of home owners believe rates will start to rise in 2013.

The majority, 73%, of home owners do have a plan in place for when interest rates start to rise, with around a third stating they will cut spending elsewhere by reducing their lifestyle budget such as clothes, eating out and holidays to cover any increases.

Barclays is urging homeowners to ensure they keep their mortgage repayment levels under review and look at how they can cut costs to help with other rising household costs and/or to use this money as a savings cushion for when interest rates do start to increase.

‘With the cheapest ever mortgage deals offered to home owners last year and the fiercely competitive mortgage market it stands to reason that the average monthly mortgage payment was at its most affordable level in a decade. However Barclays is urging homeowners not to be complacent with this affordability and to act early on in 2012 to secure good mortgage deals, as they may be able to cut their monthly mortgage payments further,’ said Andy Gray, head of mortgages at Barclays.

When asked about budgeting for 2012, the top three concerns for home owners were energy bills, some 63%, while 39% said the cost of running a car and 35% said the cost of food.

‘We know that other financial factors are likely to bite again this year, but home owners can't afford to forget about their mortgage just because base rate is predicted to remain at record lows throughout 2012,’ explained Gray.

‘The cost of energy bills, running a car and food may be beyond their control, but homeowners have an opportunity to look at their mortgage payments and shop around for better deals to ensure their mortgage remains affordable during 2012 and beyond, which will also help to offset any other rising household costs,’ he added.