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Mortgages ‘made 20% more affordable’ by recession

Bank says people spend less take-home pay on loans

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Homeowners in England and Wales saw a 20% drop in the proportion of their take-home pay spent on monthly mortgage repayments in 2009, according to new research.

Woolwich, the mortgages arm of Barclays, examined the sums being spent by homeowners on mortgage payments by comparing how much per £1,000 of take-home pay was put towards home loans in 2008 and 2009.

In December 2008, homeowners across England and Wales were spending £196 of every £1,000 they brought home on mortgage repayments. However, by December 2009 this had dropped to £157 per £1,000.

Cheaper mortgages

The average monthly mortgage payment for homeowners in England and Wales now stands at £497, according to the Woolwich. This has dropped sharply from £607 in December 2008.

Regionally, the largest fall in mortgage spending was in London. Woolwich says the proportion of pay spent on mortgage payments in the capital has dropped 23%, and found Londoners also benefited from the biggest cash falls in mortgage payments.

However, homeowners still spend more per month on mortgage payments than those in any other region Woolwich surveyed. In London, people spend an average of £189 per £1,000 of take-home pay on mortgages. This compares with £143 per £1,000 in Wales and £144 in the East Midlands.

Finding the best mortgage for you

Andy Gray, head of mortgages at Barclays, said: ‘For the 11 million UK households who have a mortgage there is a silver lining to the recession – a substantial reduction in mortgage payments right when they need it most.’

However, only borrowers with variable rate mortgages are likely to have benefited from the effects of the recession – which led the Bank of England to cut the base rate to an all-time low of 0.5%.

If you’re on the hunt for a new mortgage deal in 2010, it’s important to consider whether a variable or fixed rate mortgage is the right choice for you. While tracking down the cheapest mortgage rate is important, you need to ensure you choose a home loan with terms to suit your circumstances.

You can find out more about how different mortgage deals work by reading our advice guide. The Which? mortgage finder is also an excellent tool for comparing mortgage products. It searches the market and compares the total cost of each deal it finds, taking into account the fees and charges to ensure you aren’t caught out by unexpected costs.

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