"Despite the base rate towards the end of last year, it was the rise in house prices that had a slight impact on mortgage affordability for homeowners in Scotland"
According to the figures, Scotland is the second most affordable place after Northern Ireland (19%) in the UK. Mortgage affordability has only marginally deteriorated, despite the first interest rate in recent years and house prices in Scotland rising by 7% in the last 12 months.
The bank found that five out of the ten most affordable Local Authority Districts (LAD) in the UK are in Scotland. Inverclyde is now Scotland’s most affordable location and is the UK’s second most affordable after Copeland in North West England. Inverclyde made the jump from fifth most affordable at the end of 2016 to Scotland’s most affordable with mortgage payments taking up 15.7% of disposable income. North Ayrshire (15.9%), West Dunbartonshire (16.2%), Renfrewshire (16.4%), and East Ayrshire (16.6%) also feature in the UK’s ten most affordable locations.
Base rate rise and higher house prices lead to small decrease in mortgage affordability
Over the last 12 months we have seen a 7% increase in house prices in Scotlandwhich has led to a marginal decrease in mortgage affordability.. Despite the recent increase in the Bank of England base rate at the end of last year there has been little impact on mortgage rates so far. However, if rates were to rise over the course of 2018 this could impact the 46% of UK households who have a mortgage either on a standard variable rate or tracker rate with potentially higher payments.
Despite the very slight decrease (0.4%) in affordability, the percentage of disposable income typically spent on mortgage payments has nearly halved compared to a decade ago. At the end of 2007, mortgage payments typically cost Scots 38% of their disposable income and now they pay 20.1% with an average monthly mortgage payment of £442. This is £227 less than the UK average of £669.
Ricky Diggins, director at Bank of Scotland, said: "Despite the base rate towards the end of last year, it was the rise in house prices that had a slight impact on mortgage affordability for homeowners in Scotland.
However even with the slight decrease in affordability over the last year, the average amount that homeowners spend on their mortgage payments as a proportion of disposable income is significantly less now when compared to ten years ago and Scotland is typically more affordable when compared to the rest of the UK.”
