With average weekly earnings only increasing by 0.3% (according to the ONS), property prices have risen far faster than average earnings and haven’t given people the time to catch up, leaving them stuck either renting or unable to trade upwards.
With a 10% deposit, a person earning the average wage of £26,000 would need a mortgage of six times their salary to buy an average price property of £172,000. Mortgage lending has limited salary multiples for buyers, making it more likely to only achieve four times your salary.
The challenges created are not just focused on the London market, as national prices have increased by 6.4% over the last year to June 2014, whereas the annual movement for June 2012 - June 2013 was just 0.7%.
It also won’t have helped buyers’ confidence that there is so much speculation over the imminent increase in the Bank of England base rate or the Financial Policy Committee intervention on lending.
The current state of the UK property market will play a major factor for buyers, making it almost impossible for an average earner to buy anywhere on their own.
As a result, we are seeing a strong movement towards people joining forces and buying together with their friends and family to make buying a home achievable.
With a lot of families taking their holidays during the summer, September will give a clearer picture of how the market is really feeling about affordability issues.
