The gap between the mortgage required by the average first-time buyer and the mortgage they are actually eligible for has grown by an estimated 552% over the last decade, according to new research by London mortgage broker, Alexander Hall.
The survey reveals the average first-time buyer falling short by over £43,000 in the current market due to growth in earnings failing to keep pace with house prices.
Alexander Hall analysed first-time buyer mortgage eligibility based on the average first-time buyer house price, the average income of a first-time buyer and the mortgage they are able to obtain at the income to lending multiple of 4.5 times earnings.
The research showed that a decade ago, the average first-time buyer house price sat at £162,362 . Having placed a 15% deposit of £24,354 , the average first-time buyer required a mortgage of £138,007 .
With the average annual income of a first-time buyer sitting at £29,181 at the time, they were able to secure a mortgage to the tune of £131,315 based on an income to lending multiple of 4.5 times earnings.
This left the average first-time buyer just £6,693 shy of the required mortgage, presenting a small, but largely traversable obstacle when getting a first foot on the ladder.
Fast forward to 2024 and the average first-time buyer house price has increased by 52% over the last 10 years, meaning that a 15% deposit now stands at £36,986, with the average first-time buyer requiring a mortgage loan to the tune of £209,590 – over £70,000 more than they did a decade ago.
However, during the same period, the average income of a first-time buyer has increased by just 26% to £36,885 per year, meaning that at 4.5 times income, they are eligible for a mortgage loan of just £165,983.
This means that the gap between the mortgage the average first-time buyer requires and the mortgage they are eligible for has increased by £36,914 – a 552% increase versus a decade ago.
Recently, Nationwide came out to bat for first-time buyers, offering of up to six times income for just a 5% deposit.
However, the analysis by Alexander Hall shows that, even with this additional help, first-time buyers fall short when it comes to mortgage affordability. Placing a 5% deposit today would mean the average first-time buyer requires a loan of £234,247 but, even at six times their income, they would only be able to secure a mortgage of £221,311.
As a result, they would still fall short of the mortgage they actually require by almost £13,000 (£12,936 ).
Commenting on the data Alexander Hall director of partnerships Stephanie Daley said: “Affordability remains a struggle for first time buyers to get that first foot on the ladder. Even 10 years ago we can see the mortgage they were eligible for at 4.5 times LTI didn’t quite meet the mortgage they actually required to be able to afford the average price of a first home. The gap between mortgage eligibility and what FTB’s can achieve has continued to widen, now with the average FTB falling close to £13,000 short.”
She added: “The good news is that there are more lenders than ever before trying to bridge that gap and offer creative solutions for making that first step onto the property ladder. We’ve recently seen Halifax offer their ‘FTB boost product’ at 5.5 times income, with a 10% deposit. Nationwide went a step further at 6x income at 95% LTV.”
