The affordability of a mortgage for first-time buyers continues to improve, according to the latest quarterly EBS/DKM Affordability index. It predicts that the average first-time buyer couple would spend 13% of their net income on mortgage repayments by December of this year.
This compares with three years ago, when an average couple spent more than 26% of their monthly net income on mortgage repayments for a new home.
The EBS DKM housing affordability index is a measure of the proportion of after-tax income required to meet first year mortgage repayments for an average first-time buyer working couple with a 90% mortgage.
It takes into account changes in mortgage rates, changes in the level of mortgage interest relief and is based on average earnings and average first-time buyer new house prices.
The EBS says that with the improvement in affordability set to continue, first-time buyer mortgage repayments are predicted to fall by 44% in the two years to December 2009.
However, DKM pointed out that the average house price to disposable income ratio remains high for single person. Annette Hughes of DKM says that by September of this year, single people were paying around six times their disposable income for the average first-time buyer's house.
She said that negative equity fears and oversupply remain a problem for first time buyers and could hinder recovery in the housing market.
'There is also a sense that potential purchasers believe that house prices have further to fall, but in the short term, it will be a buyer's market,' she adds.
