An analysis by mortgage data and technology firm Twenty7tec suggests first-time buyers are being priced out of the market, even when average earnings are combined in double-income households.
More than half of first-time buyers (59%) earn less than a combined total of £60,000, the analysis finds – well below the amount required to a secure a mortgage on a typical £290,000 property.
‘With affordability criteria stretching buyers to their limits and the national average wage standing at around £37800, double-income households are now feeling the pressure’, the company said.
Nakita Moss, head of lender (pictured), added:
“Many first-time buyers are on modest incomes, even as they reach their late 30s, which leaves very little room for error when it comes to affordability. This has led to people having to wait longer to save a deposit, often skipping smaller flats and moving straight into family-sized homes as they juggle career progression with starting families. From this, advisers are having to reassess how they guide clients on long-term affordability and risk.”
With a joint income of £60,000, first-time buyers are typically limited to a mortgage of around £270,000, requiring a deposit of around £30,000. However, regional variations are pricing many people out of the market completely. In the South East, average property prices are above £440,000 and prices are rising rapidly in cities such as Leeds and Manchester.
This widening gap is reshaping where and how people can buy, Twenty7tec says, with government measures such as stamp duty relief for first-time buyers doing little to tackle the core issue of affordability.
Moss continued:
“We predict that those stuck in generation rent will choose unconventional methods to get on the ladder. We are already seeing a steady rise in group mortgages, with friends or family members buying together, as well as intergenerational households and co-ownership living models.
“Our data also shows that around one in seven first time buyers (15.4%) are now aged over 40, while the number of those aged 51 and over purchasing their first home has risen by 80% in the last five years.
“What concerns us, is that if the two-salary ceiling becomes the new normal, what other implications can this mean for buyers, especially second steppers and those looking to buy in later life? One thing is for sure, the traditional path to home ownership is being redefined and without intervention, could we see an entire generation priced out of home ownership altogether?”
