The fraction of take-home pay people spend on mortgages has remained stable, a new report shows.

The cost of mortgages across England and Wales remained at its recent peak 18.5% of household take-home pay in June 2005, the same as for May 2005, according to the latest monthly figures from the Woolwich.

This was despite a surprise increase of 0.2% in costs in the South-East to 18.9% from 18.7%, the lender said.

Andy Gray, head of mortgages for Woolwich, said: "The continued stability in mortgage payments suggests that the Bank of England’s interest rate policy is having the desired effect of slowing down house prices without massively increasing the mortgage burden for most people."

The surprise was the increase in costs in the South-east but this is likely to be down to two things:

• A relatively high number of people remortgaging after coming off very low fixed rates has boosted costs.
• There continues to be quite a lot of people remortgaging to improve their existing homes as the incentive to move house has been removed by the slowing housing market.

According to the firm’s research, to move from a £200,000 to a £300,000 house in the South-east costs as much as £13,500 in stamp duty, fees and removal costs.

"Instead of moving many people are deciding to borrow this money to carry out home improvements, hence pushing up the overall cost of mortgages," said Andy Gray.

Across the rest of the country Yorkshire and the North-East saw their payments reach new recent highs at 16.5% and 16.2% respectively. The South-West and the West- Midlands saw declines of 0.3% and 0.2% respectively. All other regions remained the same.

Andy Gray said: "With the exception of the blip in the South-East all the other regional figures seem to be moving as is expected."

"There is still some house price growth in the north hence the rise in mortgage costs in the North-East and Yorkshire but we still expect a general reduction in the mortgage burden to happen in the coming months."