The city where homeowners could see mortgage costs swallow over four fifths of their income

Soaring mortgage costs mean that homeowners in one of the most desirable cities in the UK could be paying as much as 81% of their household income on monthly repayments.

Related topics:  Finance,  Property,  mortgages
Property | Reporter
9th October 2023
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"Our analysis reflects the North-South divide in the housing market and while some areas are more affordable than others, households are still being squeezed"
- Mike Connolly - Legal Bricks

New analysis, from conveyancing technology specialist Legal Bricks based on the average salary for a couple and house price in 100 UK towns and cities, has found that with ongoing interest rate hikes sending the average cost of a fixed-rate deal to almost 7%, homeowners in Oxford could be pushed beyond breaking point.

Oxford has topped a list of the most expensive places to live in the UK and according to Legal Bricks research, as much as 81% of an average homeowner's income here could end up going on mortgage repayments.

Just behind Oxford is Bath, where households can now expect to spend 77% of their income on mortgage costs, followed by Brighton at just over 66%.

Nationally, a couple on a 7 per cent fixed-rate deal could expect to pay around 43% of their salary on mortgage repayments, with a joint pre-tax salary of £63,000 and a house worth around £297,000. Unsurprisingly, the most expensive locations are in the South, while the most affordable are in the North.

In Oxford, house prices are almost double the national average at just under £600,000 yet a combined salary is only just above average at £66,618.

With a 7% fixed-rate deal, householders in Oxford would need to earn eight times their joint salary to afford their current home, while those in Bath and London would have to earn 7.66 and 7.2 respectively. Given that lenders normally apply a 4.5 income multiplier, buyers in the most expensive locations could struggle to remortgage when their deal ends.

The research also uncovered the most affordable places to live in the UK – with Darlington coming top, followed by Hartlepool and Middlesborough.

Even with a 7% mortgage deal, homeowners would typically spend less than 30% of their income on housing, and it drops to just over a quarter in Darlington.

Property prices in the most affordable three locations are significantly lower than the national average – £153,505 in Darlington, £151,759 in Hartlepool, and £167,885 in Middlesbrough.

However, all three of the County Durham towns suffer from above-average deprivation, and home repossessions in the area have been among the highest in the UK, at more than 24 per 100,000 households.

Mike Connolly, director of Legal Bricks said: “It’s difficult to believe that the average two-year fixed deal was just 2.34% in December 2021. Now homeowners are facing crippling mortgage costs – with some having to find an extra £1,000 a month, on top of higher food and energy costs.

“Our analysis reflects the North-South divide in the housing market and while some areas are more affordable than others, households are still being squeezed.

"Demand for housing is still strong but it will be interesting to see how the nation adapts. Will they downsize, rent out rooms, or move to a town or city they hadn’t previously considered?”

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