Recent data from the Office for National Statistics (ONS) has uncovered a concerning trend in the UK housing market, revealing that property buyers are increasingly stretching their finances to purchase homes. Now, that is no big shock. Buyers have battled with property and mortgage affordability issues since property has been widely bought and sold! However, the figures released recently by the ONS indicate that in 2023, full-time employees in England were spending approximately 8.3 times their annual earnings when buying a property, while in Wales, this figure stood at 6.1 times their annual earnings.
Mortgage Times Salary Up To 8.3 Times Annual Earnings
This revelation underscores a common misconception among buyers: the belief that borrowing capacity is limitless, as long as monthly mortgage payments remain manageable. However, the reality is far more complex, as demonstrated by the significant financial strain many buyers face. Generally a mortgage lender will be willing to lend between 4.49X and 5.5X you salary, depending on different income and outgoing factors. So if people are spending 9.3 times their annual earnings on property…you can see where the glaring issues lie!
The ONS report highlights the national implications of this trend, noting that these ratios were similar to those of the previous year, marking a return to pre-Covid trends following a notable surge between 2020 and 2021. Delving into regional disparities, the data paints a very different picture of housing affordability across England and Wales.
In analysing the affordability landscape, it’s evident that buying challenges vary greatly depending on location. In regions such as the North East, where median workplace-based earnings in 2023 were £31,200, homes were comparatively more affordable, costing less than five times average earnings. Contrastingly, in London, where earnings soared to £44,370, new dwellings typically cost more than five times average earnings, rendering homeownership increasingly unattainable for many.
Shortage In Available Homes And Future Government Policies
Despite improvements in affordability in 75% of local authorities since 2022, significant challenges persist. Only 7% of local authorities had homes deemed affordable, with new dwellings across the UK generally costing more than five times average earnings. Notably, the ten most substantial improvements in affordability over the past five years were primarily concentrated in London or bordering areas, though these regions remain among the least affordable.
To put these findings into more context, it’s essential to look at the broader economic landscape. Median workplace-based earnings across England and Wales have more than doubled since 1997, with significant disparities observed across regions. For instance, median earnings in London surged from £20,871 in 1997 to £44,370 in 2023, far outpacing the national average. The data from the ONS also revealed that London buyers easily had the highest ratio of median house price to median gross annual workplace based earnings in the country, standing at 11.95 in 2023.
Speak To A Mortgage Broker
As prospective buyers grapple with these challenges, policymakers and industry stakeholders face mounting pressure to address underlying affordability constraints. Whether through initiatives to stimulate housing supply or targeted support for first-time buyers, proactive measures are essential to ensure that the dream of homeownership remains within reach for all. With the next general election in the UK to be held no later than 28th of January 2025, we are all hoping that we see some more encouraging house building propositions to kickstart the property market, which has now struggled for a number of years.
If you or anyone you know is looking at buying a property in the near future, whether it’s somewhere for you to live or an investment property, we are here to help with all your mortgage needs. Call our team of expert mortgage brokers today to see how we can help.
