First time buyers need to double their salary to be approved for a mortgage

Wed, 05 Aug 2015

First time buyers need to double their salary to be approved for a mortgage
Figures have found that on average, first time buyers will have to double their salary in order to purchase a first home.

It has been reported that a starter home, on average, will now cost £211,000. This is after a rise in May of the value of these kinds of homes by 5.1 per cent, according to the Office of National statistics.

This means that a mortgage will have to cover £175,000, assuming a 17 per cent deposit (for those people not using schemes like Help to Buy to lower their necessary deposit).

Mortgage lenders will not give out a loan that exceeds 4.5 times the size of the borrower's salary. This means that a first time buyer in this situation would need a salary of £38,917 in order to get a loan for a first buy of an average value, according to Which?

But on the other hand, HMRC say that the average salary of people aged 20-24, those most likely to be looking for a first home, is only £16,400.

Simply, young people are being frozen out of the market, a problem which is only going to get worse unless house prices are lowered.

The desperation in the market isn't just going to fade away with age. Those unable to buy now will still have to compete with each other further down the line, and until supply can keep up with demand, prices will not come down and people will remain without a home of their own.

At this rate, it seems likely that Generation Rent will be trapped renting forever, and home ownership will become a notion of the past.
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