With house prices at 12 times the median salary, affordability remains a major challenge
London homebuyers on an average salary must save around £370,000 for a deposit to afford a property, according to new research from longer-term lender April Mortgages.
With house prices in the capital averaging £581,310 — more than 12 times the median salary — many buyers face significant financial hurdles. Under typical lending rules that cap loans at 4.5 times income, a single applicant earning the median London salary of £47,086 would need a deposit of £369,423 to purchase a home at the average price.
The challenge is even greater in high-cost areas. In Kensington and Chelsea, where the average property exceeds £1 million, a borrower on a median income would require at least £884,296 for a deposit. Westminster and Camden also present steep barriers, with required deposits of £645,937 and £608,163, respectively.
Even with a 10% deposit, average earners are unable to afford a home in any of London’s 33 boroughs under standard lending limits. In 25 boroughs — 76% of the capital’s local authorities — buyers would need to save more than £300,000 for a deposit to meet affordability requirements.
Barking and Dagenham remains the most affordable borough, with an average home price of £355,594 — 9.74 times the median income. There, an average earner would still need a deposit of £191,373.
For couples, affordability improves but remains a challenge. A dual-income household would need an average deposit of £193,107, with deposits exceeding £200,000 in 14 boroughs. Only four of London’s local authorities are within reach for couples with a 10% deposit.
First-time buyers in England put down an average deposit of £68,154, according to the latest UK Finance data. In Northern Ireland, the typical deposit is £39,034.50, while buyers in Wales and Scotland pay £34,475.91 and £30,786.97, respectively.
“The prospect of owning your own home in London is becoming a pipedream for the majority of average earners,” said Mark Eaton (pictured), chief operating officer of April Mortgages. “The speed at which house prices are rising is leaving many first-time buyers unable to afford a home. House prices have soared over the last 20 to 30 years and are estimated to be worth over thirteen times the average household income in London.
“This issue is being compounded by banks and building societies’ strict lending criteria and tough affordability tests, which make accessing the mortgage loans needed very difficult. While these measures were originally put in place to protect borrowers, they are now having a punitive effect on those who are in most need of support.
“Furthermore, there are so many potential homeowners that are still unaware of the option to borrow up to six times income and maybe unnecessarily spending thousands of pounds on rental costs instead of taking the first step onto the property ladder.”
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