Britain's first home market unaffordable for majority of buyers - report

Research reveals why many struggle to get their first foot on the property ladder

Britain's first home market unaffordable for majority of buyers - report

New research has found a considerable gap between the average cost of a first home and the borrowing eligibility of an average first-time buyer, leading to the conclusion that the market is unaffordable for the majority of Brits.

Stipendium analysed the purchasing power of the average first-time buyer based on their ability to borrow through a mortgage at 4.5 times their earnings. The platform then looked at how this level of purchasing power compared to the actual sum required to purchase a first home based on the current first-time buyer house price, minus a 15% deposit.

The research shows that across Great Britain, the average annual gross salary of a first-time buyer is £32,927. At 4.5 times their income, it means the average first-time buyer can secure a mortgage on a property valued up to £196,818.

However, the average first-time buyer house price is currently £234,469. Even after deducting a 15% deposit of £35,170, this still leaves £199,298 to be covered by a mortgage, meaning that the average first-time buyer is short by over £51,000 (-26%) based on their income mortgage potential.

Read more: How much do first-time buyers pay compared to existing homeowners?

London is predictably the least affordable region for a first-time buyer, where their mortgage potential sits at £196,818 based on 4.5 times their income, while the average first-time buyer house price is £457,433, leaving £388,818 to cover once a 15% deposit has been saved – a huge difference of £192,000.

The South East (£94,109), East of England (£88,291), and South West (£88,603) are also home to some of the biggest gaps in first-time buyer affordability between their borrowing potential and the actual cost of buying.

Stipendium said there are two areas in Britain where first-time buyers will be able to acquire a home through a mortgage.

In Scotland, the average first-time buyer earns a gross annual income of £31,172, meaning they are able to borrow £140,276 at 4.5 times this income. The average first-time buyer house price is £149,536, leaving £127,106 to cover when borrowing after a deposit is saved. This means first-time buyers are £13,171 in the green when it comes to property market affordability.

In the North East, first-time buyers are able to borrow £112,716 based on gross income, £12,973 more than the sum required to cover the cost of the average first home less a 15% deposit.

Christina Melling, chief executive at Stipendium, said that years of sustained house price growth have put today’s first-time buyers at a severe disadvantage, especially when considering the fact that the growth in available earnings has not kept pace.

“As a result, many first-time buyers are restricted when it comes to their house hunt, as they can only look to buy at the price thresholds that lenders will allow them to borrow,” Melling pointed out.

“As our research shows, there’s quite a stark difference between this borrowing eligibility and the actual cost of a home and so, it’s hardly surprising that so many struggle to get that first foot on the ladder, or worse, are completely priced out of the market.”