Low interest mortgage rate is most affordable since 2004

The continued low interest mortgage rate has helped make monthly mortgage payments for first-time buyers the most affordable for nearly eight years, according to the Council of Money Lenders.

Council of Money Lenders data reveals that first-time buyers' deposit requirements have remained stable in recent months at an average level of 20 per cent, but the average monthly interest payments have continued to fall. First-time buyers now typically spend 12 per cent of their income on monthly interest payments, which is the lowest level since January 2004. Affordability for movers also improved as a result of the low interest mortgage rate. Movers paid an average of 9.2 per cent of their income on mortgage interest, which is the lowest level since monthly records began in 2002.

Repayment mortgages remain popular, with 97 per cent of first-time buyers and 83 per cent of movers going for this kind of deal. As a result, 44,500 home loans were taken in October, which was down from 48,200 in September and 46,900 in October 2010, first-time buyers made up 16,400 of this total.

Paul Smee, Council of Money Lenders director general, said: "Despite the fall in lending in October, it is possible that we will see signs of increased activity by first-time buyers in the early months of next year, as we approach the end of the government’s stamp duty concession at the end of March. The underlying picture of the market overall, however, is level, albeit at low levels of lending activity."

The low interest mortgage rate has helped to ease the financial pressure on home-owners, however the market was slowed by the large deposits still required by first-time buyers time.