Even with lender initiatives to address the affordability challenge, buyers still face a funding issue
The gap between the mortgage needed by the average first-time buyer and the loan they qualify for has grown by 552% over the past decade, according to research from London-based mortgage broker Alexander Hall.
The analysis found that the average first-time buyer is currently short by more than £43,000 due to house price growth outpacing income increases. Alexander Hall examined mortgage eligibility based on average first-time buyer house prices, average incomes, and the standard lending multiple of 4.5 times earnings.
A decade ago, the average first-time buyer house price was £162,362. After placing a 15% deposit of £24,354, the typical buyer needed a mortgage of £138,007. With an average income of £29,181, a first-time buyer could secure a mortgage of £131,315 based on the 4.5 times income rule. This left a gap of £6,693 between the loan they qualified for and the loan required.
In 2024, the situation has worsened. The average first-time buyer house price has risen by 52% to £317,271, requiring a deposit of £36,986 and a mortgage of £209,590—an increase of over £70,000 from a decade ago. Meanwhile, first-time buyer incomes have grown by just 26% to £36,885, meaning they now qualify for a mortgage of £165,983. This leaves a shortfall of £43,607, a 552% increase in the gap compared to 10 years ago.
Lenders like Nationwide have tried to address the affordability challenge, offering mortgages up to six times income with just a 5% deposit. However, Alexander Hall’s research shows that even with these products, buyers still face a funding gap. A 5% deposit on the average first-time buyer home would leave a buyer needing a loan of £234,247, but even with a six times income mortgage, they would only qualify for £221,311 — still leaving a shortfall of nearly £13,000.
“Affordability remains a struggle for first-time buyers,” said Stephanie Daley (pictured), director of partnerships at Alexander Hall. “The gap between mortgage eligibility and what buyers need has continued to widen, with the average first-time buyer falling short by close to £13,000.”
Daley noted that while the market has seen more innovative products from lenders like Halifax and Generation Home, the growing disparity underscores the importance of seeking independent mortgage advice to navigate available options.
Recent products, such as Halifax’s 5.5 times income offering and Nationwide’s six times income loan, alongside other solutions like Generation Home’s Deposit Booster and Skipton’s 100% loan-to-value mortgage, aim to help buyers enter the market. However, the persistent gap in affordability highlights the ongoing challenges for first-time buyers.
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