Mortgage Affordability Better in Scotland

Mortgage affordability in quarter four (Q4) of 2016 for both first time buyers and home movers was lower in Scotland than the rest of the UK, according to new research by Bank of Scotland.

Mortgage affordability is defined as the proportion of disposable earnings devoted to mortgage payments. In Scotland, mortgage payments amounted to 19.8% of disposable earnings on average, compared to 29.7% for the UK.

The most affordable Local Authority District (LAD) in Scotland, and the UK, was West Dunbartonshire, where mortgage payments equated to 15.4% of disposable income in Q4 2016. North Lanarkshire (15.6%), East Ayrshire (14.6%), Renfrewshire (16.6%), Inverclyde (16.8%), Stirling (17.0%) and Falkirk (17.2%) also dominate the UK’s ten most affordable LADs.

Although the majority of Scottish LADs have seen a slight increase in the amount of earnings devoted to mortgage payments when compared to Q4 2015, mortgage affordability in Scotland has improved by 17.5 percentage points since reaching a peak of 37.3% in Q3 of 2007. Historically low mortgage rates have apparently been the main driver behind the significant improvement in affordability since 2007, says Bank of Scotland.

The largest improvement in mortgage affordability was seen in Inverclyde, where mortgage payments as a proportion of disposable earnings fell by 20.1% since 2007 (36.9% to 16.8%). Although they are two of the least affordable LADs in Scotland, East Lothian and Midlothian were close behind, having both reduced by 18.2% over the same period.

“The significant reduction in mortgage payments by a typical borrower has resulted mostly from record low rates that have provided monthly savings of, on average, around £225 when compared to payments in 2007,” said Graham Blair, Mortgage Director at Bank of Scotland.

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