London’s homeowning households are now spending nearly a third of monthly income on mortgage repayments amid climbing rates, new data has shown
The worst borough for mortgage affordability is Camden, according to research by property lending experts Octane Capital. In the north London borough, the cost of a mortgage swallows up an eye-watering 43 per cent of the average monthly household income.
This is nearly twice the national average, with the average UK household now putting 22 per cent of its monthly income towards a mortgage. This is up from 16 per cent in January.
CEO of Octane Capital, Jonathan Samuels, said: “The current outlook for the nation’s homebuyers and owners is becoming increasingly difficult and it really demonstrates just how high the cost of homeownership has climbed when nearly a quarter of household income is swallowed up by mortgage repayments.”
After hovering around 2 per cent for years, mortgage rates have shot up with the average two-year fixed mortgage reaching a 14-year high of 6.53 per cent this week.
The rising rates, a result of interest rate hikes by central banks and exacerbated by the fallout from the government’s recent mini-budget, are putting extra squeeze on households. Last week, the Bank of England said the number of people struggling to pay mortgages would rise sharply next year.
In London, Octane Capital’s research shows that Kensington and Chelsea is the second most unaffordable area to have a mortgage, with the average household shelling out 42 per cent of its monthly income.
However while mortgage-holders in more affluent areas are seeing rates climb higher, many homeowners in these locations own their homes outright and are more likely to be insulated from wider economic turbulence.
Agent Knight Frank has analysed Land Registry data going back to 2011 to find the areas in the UK with the most cash buyers. While second home hotspots like Norfolk top the list, London’s Kensington and Chelsea makes the UK top ten for cash sales.
According to the data over half of all homes in the borough have been purchased in this way since 2011. Other cash buyer hotspots include the City of London (47 per cent) and Westminster (46 per cent).
Outer London areas are more likely to rely on mortgage debt, according to Knight Frank. The area with the lowest amount of cash buyers across the whole of the UK was Barking and Dagenham, with just 12 per cent.
“The more equity that flows into and is already inside a particular housing market, the lower the level of financial distress,” said Tom Bill, head of UK residential research at Knight Frank. “Downwards price pressure will be felt everywhere but some locations will be more insulated than others.”
