A decision by the Bank of England to leave its base rate unchanged this month at 4.75 per cent, still leaves house purchasers in England and Wales forking out an average 19 per cent of household income to pay for their mortgages.

The latest Woolwich Mortgage Affordability Research puts the current average cost of servicing a mortgage at £546 – excluding increases that will come through as a result of the August hike in base rate.

This is up from July when the cost was put at 18.8 per cent of average household income and represent the highest level since Woolwich first started monitoring affordability in 2002. This can be attributed to a number of factors including higher rates for fixed rate mortgages and the buoyant property market this year, particularly in London where affordability costs went up to a new high of 23.5 per cent in August 2006, said the mortgage lender.

‘With the increase in base rates in August yet to filter through, the cost of borrowing still has some way to go and it will become increasingly questionable whether another increase in interest rates is needed as the steam already seems to be coming out of the market’, said Woolwich head of mortgages Andy Gray.

All areas of the country with the exception of the south west (down 0.2 per cent) and west midlands (no change) saw affordability get worse in August. The sharpest rises were in London, the north west and Wales, which all saw increases of 0.4 per cent over the month.

According to the Woolwich, Holborn and St Pancras in London remained the least affordable place in the country with 31.2 per cent of take home household pay spent on mortgage payments. Camberwell and Peckham were second (30.5 per cent) and Hackney South and Shoreditch third (30.1 per cent). Outside London, Oxford East was the least affordable area with 26.2 per cent of earnings spent on mortgages.

Staffordshire Moorlands remained the most affordable area to live in with 12.9 per cent of earnings spent on repayments.