MAB: Homebuyers’ income exceeds £40,000 on average for the first time in almost five years

MAB jpeg

  • House purchase applications up 31% in Q2 2013 and 58% year-on-year
  • Affordability improves as high earners mobilise
  • Twelve months since average two or five year fixes last rose

Homebuyers’ average income crept above £40,000 in June 2013 for the first time in over four and a half years according to the National Mortgage Index from Mortgage Advice Bureau (MAB), the UK’s leading independent mortgage broker.

This is the first time that purchasers’ income has averaged more than £40,000 since January 2009 when MAB first began collecting this data. June’s average of £40,510 was 2% higher than in May (£39,648) and 9% higher than June last year (£37,164)*.

Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index also shows that purchase prices grew by 1.4% in the month and by 4.5% since June 2012 to £224,450.

Typical buyers’ income, borrowing and purchase profiles

June 2013

May 2013

June 2012

Average income*

£40,510

£39,648

£37,164

Average loan

£158,456

£155,338

£148,802

Average purchase price

£228,405

£225,151

£218,619

Affordability**

17.7%

17.6%

17.0%

 

Affordability has therefore improved gradually over the last year as a result of prices growing at a slower rate than incomes. However, homebuyers’ average income has grown significant more (by 9%) than annual inflation (2.7% ***) or average weekly earnings (3.7% ****) suggesting that more affluent borrowers are driving up the average as they take advantage of the housing market recovery.

This trend has been especially visible across Greater London, the South West, the Midlands and the North where homebuyers’ typical incomes have risen by 10% or more since June 2012. Only three regions – the South East, East Anglia and Wales – saw average incomes fall.

Quarterly purchase applications jump by almost a third

Growing interest in the property market contributed to a 31% increase in the volume of purchase applications between the first and second quarters of 2013.  Despite a 2% drop between May and June, quarterly purchase applications were up by 58% compared with the second quarter of 2012.

June also witnessed the highest volume of remortgage applications since the financial crisis – 6% more than in May and 83% up on June 2012.   Remortgage loan to values (LTVs) have shifted noticeably in the last year with the typical application now involving 5% less equity (59.6% LTV – June 2013 vs. 54.6% LTV – June 2012).

One year since average two or five year fixes last rose:

Competition continued to drive up product numbers in June with a 2% increase pushing this average ever closer to the 10,000 marker. At 9,887 the average number of products was the highest since November 2011.

Average fixed rates fell once more in June: apart from a solitary rise of 0.06% in the average three year fixed rate between June 2012 and July 2012, average two, three and five year rates have either held firm or fallen every month for the last year.

The average three year rate fell by 0.07% to 4.06% from May to June while average two and five year rates each fell by 0.08% to 3.74% and 3.88% respectively. June’s average five year rate was more than a full percentage point lower than a year ago (-1.02%) with the average two year rate (-0.98%) and three year rate (-0.90%) close behind.

For anyone taking out a £150,000 mortgage over a 25 year term, the rate changes over the last year equate to a saving of £3,412 over the lifetime of a two year fixed deal, £4,625 for a three year deal and £8,493 for a five year deal.

Fixed rate performance June 2013 vs. June 2012

2 year fixes

3 year fixes

5 year fixes

June 2012 average

4.72%

4.96%

4.90%

June 2013 average

3.74%

4.06%

3.88%

June 2012 fixed term cost ◊

£20,462

£31,442

£52,090

June 2013 fixed term cost ◊

£18,489

£28,682

£46,911

June 2012 full term cost ◊

£240,030

£242,461

£245,021

June 2013 full term cost ◊

£236,618

£237,836

£236,528

Based on taking out a £150,000 mortgage for a 25 year term.

Brian Murphy, head of lending at Mortgage Advice Bureau, comments:

“June’s figures suggest that the first part of the jigsaw is firmly in place as far as a housing market recovery is concerned. The first instalment of Help To Buy has whetted the appetite for property and sent buyers swarming to their nearest estate agent to see what’s on offer.

“Having almost 7,000 reservations under his belt will give George Osborne confidence when he steps up to play his next card and reveal the details of the mortgage guarantee scheme. It’s a crucial move that will open up the market to less affluent buyers if he gets it right and if confidence spreads to the construction sector.

”Reports that fixed mortgage rates will start to rise are turning out to be premature; in fact, I’d bet my house on further reductions over the summer.”

-ENDS-

* Three month averages.  The figures for average salary take all applications into account and use the larger income for any application which features two borrowers who are both earning.

** Affordability is treated as the average annual income as a percentage of purchase prices

*** Office for National Statistics, Consumer Price Inflation up to May 2013, released 12 July 2013

**** Office for National Statistics, Average Weekly Earnings up to April 2013, released 12 June 2013

 

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