The difference between the average UK salary and the income that first time buyers need to get onto the property ladder has hit a post-recession high, according to research conducted on behalf of mortgage insurer Genworth.
First Time Buyers Must Earn £11k More Than the UK Average to Get on the Property Ladder
Analysis of Office for National Statistics and Council of Mortgage Lenders figures shows that the average income needed to acquire a first time buyer mortgage is £38,977 – a huge £11,332 higher than the average UK salary of £27,645.
This is the greatest difference recorded since the recession, indicating how access to homeownership in the UK has become increasingly limited. It also signals how and why the private rental sector is likely to grow in the future.
Yesterday, we revealed that 30% of all households will rent from private landlords in 30 years’ time.
The difference in income needed and the average salary has grown significantly in recent years, due to stricter lending criteria and soaring house prices. Many prospective first time buyers will now have little chance of getting onto the property ladder without support from a partner, family member or Government scheme.
In fact, it was recently found that just 16 parts of the country are affordable for single first time buyers.
Comparatively, the gap between the income needed for a first time buyer mortgage and the average UK salary in 2000 was just £3,170 and £7,505 in 2011.
In London, the average salary needed for a first time buyer mortgage is almost £58,500, or 65% more than the UK average. Compared with regional salary growth of just 1.3%, the incomes of first time buyers have increased by 19.4% in the capital.
This means that the difference between the salary needed for a first time buyer in the capital and London’s average is £23,142, more than double the gap in the rest of the UK of £11,332.
This is 3.9 times more than in Yorkshire, where the income needed for a first time buyer and the average salary is the smallest gap.
It is therefore unsurprising that in the first ten days of the Help to Buy London scheme launching, a huge 15,000 hopeful buyers showed interest in the initiative.