The income requirements for first time mortgages are on the rise across the UK as lockdown restrictions ease and the housing market reopens.
Research undertaken by Hamptons International and Guardian Money found that in order to afford the average first time buyer property in the UK, borrowers who had managed to save a 15% deposit would need a household income of £37,096 in order to secure a mortgage.
Assuming households are made up of two adults working full time, it’s thought around 70% of first time buyers could achieve the figure however they would need a deposit of around £29,458.
Despite the housing market seemingly booming across the country with properties selling fast, rising house prices and little chance of wage increases in the near future mean the outlook is daunting for first time buyers.
Recent analysis shows that three in 10 young households across the UK would struggle to meet the affordability checks to get a mortgage and even if they did would be required to save up a 15% deposit, which many would find difficult or even impossible. The requirements mean that many would-be house buyers face many more years of renting as they save up a deposit.
Since lockdown restrictions began to ease and thanks to government initiatives such as the stamp duty holiday, the housing market has been moving fast and with that comes an increase in house prices. However, with industries and businesses facing budget cuts and an unclear economic future, pay rises and wage increases are on the back-burner with household incomes stalling.
Since the coronavirus pandemic, banks and building societies have withdrawn almost all 95% mortgage offers however Boris Johnson has announced plans to create a new ‘Generation Buy’ scheme which would centre around low-deposit mortgages to help the younger generation get on the property ladder.
The outlook for buyers isn’t uniform across the country though with Hamptons International’s research showing that for an 85% mortgage:
- In the South-East of England the average house price for first time buyers is £258,640 which would require a household income of £48,854 and a deposit of £38,796. Around half of households would qualify for a mortgage.
- In the North-East of England the average house price is £110,280 which would require a household income of £20,831 and a deposit of £16,542. Nine out of 10 households would earn enough.
- In Wales the average house price is £143,110 which would require a household income of £27,032 and a deposit of £21,467. Around 90% of households would earn enough.
- In Scotland the average house price for first time buyers is £123,990 which would require a household income of £18,599 and a deposit of £18,599. Around 90% of households would qualify.
The analysis suggests that in order for first-time buyers to get on the property market and for schemes such as ‘Generation Buy’ to come to fruition there would need to be changes to how much risk lenders are prepared to take on.