Mortgage affordability weakened for the second month in a row in January, according to analysis from Stonebridge.
The firm’s latest bi-monthly Mortgage Affordability Index found that borrowers spent more of their salary on monthly repayments in December and January compared to previous months.
In December, repayments accounted for 36.5% of the average borrower’s salary, up from 36.3% in November, and increased to 37% in January.
This decline in affordability was linked to larger loan sizes, slow wage growth, and rising mortgage rates.
The data also showed that the average loan size grew 1.4% to £192,114 in January, while the average annual salary rose 0.5% from December to January.
Rob Clifford, chief executive at Stonebridge, said: “Mortgage affordability has continued to be tight for the second consecutive month as rising house prices push loan sizes higher and mortgage rates edged up.
“But in context, remember that affordability remains significantly better than at the start of last year, and affordability will definitely improve as rates fall in coming months.
“While the Bank of England’s Monetary Policy Committee opted to hold rates in May, there are mounting calls for it to reduce borrowing costs further.”
Clifford added: “Inflation remains a concern, but much of the recent increase is imported, driven by rising energy costs and a strong dollar rather than by surging domestic demand.
“As a result, the risk of inflation spiralling out of control again appears limited.
“At the same time, the UK economy is struggling for momentum.”
He said: “If growth continues to stall, the MPC may have little choice but to step in to provide support.
“That could lead to lower borrowing costs in the months ahead, offering much-needed relief to mortgage borrowers, who are still grappling with the impact of the cost-of-living crisis.”
