The proportion of disposable earnings devoted to mortgage payments – a key affordability measure – is at its most favourable for 12 years, according to new research by Halifax.

Nationally, typical mortgage payments for a new borrower – both first-time buyers and homeowners – at the historic average loan to value ratio stood at 28% in the second quarter of 2011, the lowest level since 1999 and down by almost half from a peak of 48% in Q3 2007. There has also been a modest decline over the past year from 30% in Q2 2010, reducing mortgage payments relative to earnings further below the average of 37% recorded over the past 27 years.

Lower house prices and reduced mortgage rates, which have fallen since 2007 from an average of 5.84% to 3.85%, have been the main drivers behind the significant improvement in affordability. However, the average deposit put down by buyers has increased over the same period from 20% of the property value in Q3 2007 to 25% in Q2 2011.

All 12 regions have experienced the improvement in affordability since mid-2007 with affordability better than the long-term average in all regions. The most substantial percentage falls in average mortgage payments as a proportion of average disposable earnings have been in Northern Ireland (-62%) and Wales (-45%).