New data released by mortgage lender Halifax claims to show that a massive 63% of first time buyer mortgages taken out in 2022/23 are in joint names rather than a sole purchase. That means that just 37% of first time buyers are taken out by a single person on their own. A far cry from the mortgage and property market of the past where a mortgage based on a single income was very achievable.
What Does It Take To Afford A Mortgage?
Halifax’s data shows that less than 10 years ago, the amount of first time single person purchasers was at 57% and only 43% actually bought as a couple. So why have things changed so drastically recently? The main issues it seems are the price of property, the average income received by people now compared to the cost of living, and subsequently the ability (or inability) for borrowers to save money on their own.
Generally, mortgage lenders will be willing to lend between 4.5 and 5X a person or persons income for a mortgage. Other factors such as credit commitments will impact the total amount they are willing to lend but this is more or less the rule. So for example, someone earning £45,000 a year as a single purchaser with no credit commitments, could potentially be lent between £202,500 and £225,000. If you are a couple purchasing together, a lender will allow you to include both of your incomes in the mortgage application, subject to meeting necessary lender income criteria.
So if someone earned £45,000 a year and their partner earned £30,000 a year, the lender could potentially lend them between £337,500 and £375,000. As we can clearly see, if you want to get a larger mortgage, the more income you have, the better. According to the office of national statistics, in 2022 the average salary of a full time worker was £33,000 in the UK. That means that if you are a single person purchasing a property and you earn £33,000 a year, you could only get between £148,500 and £165,000 as a mortgage. This is one of the major reasons why coupling up to buy is becoming more commonplace in 2022/23.
Directly connected with the above point, another reason why couples purchasing together are overtaking single person buyers is the price of property in the UK. Yes, at the moment it does look like property value will be coming down a fraction, but that doesn’t take anything away from the fact that property in the UK is at it’s highest value ever. Due to a great number of factors that have developed over many many years.
According to Forbes, the typical property in the UK now costs around £261,000 on average. Less than 10 years ago, this figure was at £176,500. That means that the same adult earning an national average salary of £27,200 in 2014 could purchase a property at £176,500, on their own, with between £40,500 to £54,100 deposit, depending on their borrowing potential and the lender. The same person on the average salary of £33,000 today would need to put down £96,000 and £112,500 to purchase an average property in the UK!
Salaries & Cost Of Living
In 9 years, the average salary in the UK has only increased by £5,8000 but the average price of a property has increased by £84,500 making it almost impossible to purchase a property without either tripling your deposit or…purchasing with someone else. This brings us on to another major issue that single first-time buyers are facing in 2022/23, the ability to save a deposit. The cost of living is ridiculously high right now. Food, energy, clothing, drink, everything is more expensive due to rising inflation and general economic instability in the UK. This coupled with low average salaries means that most people are left with hardly any money saved after paying for all necessities.
Where someone might have been able to put away a few hundred or a thousand pounds from their pay packet a few years ago, people are often left with very little at the end of the month or in a lot of cases, no money at all and needing to rely on credit cards and loans to bridge the gap from pay cheque to pay cheque. Unfortunately, this means that people in general are needing to wait longer and longer before they have enough money saved up for a deposit. And that is just the couples purchasing! Single people who don’t have the ability to use joint savings toward a deposit will need to save twice as long before even getting near to purchasing a property.
The bank of mum and dad has become a very popular form of deposit for first-time buyers in recent years as saving your own deposit is becoming less and less feasible. But, it is not all doom and gloom for single persons looking to purchase. House prices are coming down, and there are plenty of schemes being offered by banks and builders, aimed directly at helping single first-time buyers with deposits and mortgage lending such as shared ownership and 95% mortgage guarantee.
I’m A Single First-Time Buyer. Where Do I Start?
The best thing to do is to speak with us at Oportfolio Mortgages. Were are specialist mortgage advisors whose forte is first-time buyers. We can help you to determine exactly what mortgage is available to you, how much you need to save for a deposit, and the best route forward for your own circumstances. Give us a call today to see how we can help you.