Affordability gap finally closing says A&L

The yawning affordability gap in the UK property market is finally beginning to close as cheaper mortgages and rising wages bridge the divide, claims Alliance & Leicester.

The discrepancy between income and property prices has led to a small industry of pricy 100 per cent mortgages and other products designed for out-priced first time buyers.

The changing affordability ratings have seen a small surge of first time buyers considering entering the market and of homeowners remortgaging for the best deals.

"We are seeing greater confidence in the mortgage market from consumers," said Chris Rhodes, managing director of Alliance & Leicester retail banking.

"It's particularly pleasing to see the increased confidence amongst the under-30s. Increased first-time buyer activity enables others to move up the ladder."

The number of under-30s considering entering the property market has increased by a third since the beginning of the year, to 16 per cent.

The number of homeowners planning to remortgage their homes or move has doubled since January to 15 per cent.

"Affordability remains good," said Mr Rhodes.

"While household incomes have grown modestly, interest rates are lower than a year ago. Overall the cost of servicing a mortgage has therefore fallen slightly, despite gently rising house prices," he added.

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