Call for your free quote 0800 955 0058

First time buyers pay 13 times their earnings to own London property

London house prices exceed first time buyer annual earnings by 13 times and is more than twice the multiple of the North East.

London is the least affordable region in the UK according to a report from the Office of National Statistics (ONS) with first time buyers paying 13 times their earnings to buy a property.

In contrast house prices in the North East on England are 5.5 earnings of first time buyers and the most affordable for 18 of the last 19 years.

The study by ONS finds an “affordability ratio” by taking the lower quartile price paid for residential properties divided by the median gross annual earnings for full-time workers aged 22 to 29 years.

For first time buyers purchasing a home has become less affordable in 78% of local authorities in 2017 when compared to the previous year.

London less affordable than five years ago

The capital has become less affordable even in the last five years where the multiple of earnings has increased from 8.0 to 13.0 times.

With competition from buy-to-let investors and reduced supply of suitable properties, prospective home buyers must continue renting and saving for a bigger deposit.

Mortgage lenders will typically limit borrowings to 5 times earnings making it very difficult for young first time buyers as they need substantial deposits.

The following table from ONS compares the North East and London and shows the multiple first time buyers pay over earnings to get on the property ladder.
Year North East London
2008 4.8 7.9
2009 4.3 7.1
2010 4.4 7.4
2011 4.3 8.0
2012 3.9 8.0
2013 5.5 9.7
2014 5.7 10.4
2015 5.7 11.3
2016 5.5 12.6
2017 5.4 13.0
The North East is the most affordable region in the country with multiples of 5.4 times followed by the North West with 6.0 and Wales at 6.5 times earnings.

Yorkshire and Humber were also more affordable with house prices 6.6 times earnings and a better place for those aged 22 to 29 years to buy their first home.

For remortgage buyers over the past five years the rise in prices has created significant equity and gives them an opportunity to release capital which they can use to improve their home.

Regional affordability gap increasing

The affordability gap between the North and South is increasing with London in 1999 on multiples of 3.8 one-and-a-half times more than the North East with 2.4.

This could be an advantage for home movers if they leave areas with high multiples to areas with low multiples as they may have extra equity for a deposit to buy a larger home or can reduce their mortgage.

The accelerating house prices in the capital over eighteen years has seen the multiple extend with London on 13.0 almost two-and-a-half times the 5.4 figure for the North East.

This means since 1999 in London prospective first-time buyer affordability ratio in London has increased by 235% whereas in the North East, the ratio has increased by 122%.

The South East is also unaffordable for the majority of young people with property 11.8 times earnings followed by the East with 11.2 and the South West on 10.1 times.

Older homeowners could help as the considerable value in their property allows the equity release mortgage buyer to access wealth which they could give to a child or grandchild for a deposit on their first home.

What are your next steps?

Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.

For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to improve your quality of life or help your children start or expand a business.

Start with a free mortgage quote or call us and we can take your details. Learn more by using the equity release calculator, mortgage monthly cost calculators, and property value tracker chart.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.


Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.18% Fixed Rate
60% Loan to Value
£1,034 App Fee
Until 31/10/2022
Reverts to 3.59%
1.17% Fixed Rate
60% Loan to Value
£1,025 App Fee
Until 31/09/2022
Reverts to 3.59%
1.16% Fixed Rate
60% Loan to Value
£1,525 App Fee
Until 01/11/2022
Reverts to 4.09%
1.19% Fixed Rate
60% Loan to Value
£999 App Fee
2-Years Time
Reverts to 3.59%

The latest mortgage news


25 Jun 2021

Seaside towns in Britain with house prices up 10pc due to strong demand

Demand for coastal living has seen house prices in Britain’s seaside towns rise 10% over the year as homeowners change their lifestyle.

24 Jun 2021

House prices at record levels with lack of property choice for buyers

Supply of properties on the market and available to buyers is an all-time low at the same time house prices are at record levels.

11 Jun 2021

Prices for house sales are rising four times faster than flats

Strong demand for houses has driven price growth up 5.2% in the last year which is over four times more than the 1.1% growth for flats.

28 May 2021

Fixed rate mortgage deals fall to under 1pc as lenders compete for borrowers

Fixed rate mortgages are cut to 0.99% for borrowers with large deposits looking to remortgage as competition increases from lenders.

Call for your free quote 0800 955 0058

  • IMPORTANT

    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.

  • WARNING

    Equity Release - Equity Released from your home will be secured against it. Mortgages – Your home may be repossessed if you do not keep up repayments on your mortgage or other loans secured against it. Think carefully before securing other debts against your home. The information contained in this website is subject to the UK regulatory regime and is therefore intended for consumers based in the UK.

    CONTACT

    Address:
    9th Floor, 30 Crown Place
    London, EC2A 4EB

    Phone:
    0800 955 0058

    Email:
    info@londoncitymortgages.co.uk

    London City Mortgages Limited is a registered company in England & Wales under company number 09278987. London City Mortgages Limited is an Appointed Representative (FCA no. 655965) of Blackstone Moregate Limited (FCA no. 459051) which is authorised and regulated by the Financial Conduct Authority. LCM and LCM Equity Release are trading names of London City Mortgages Limited.

    2021 © London City Mortgages.
    Website designed & developed by Spyre Media