Affordability is nearly at a record low

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by Kay Murchie

Affordability is nearly at a record low, with the percentage of income required for a deposit increasing 8% in the 12 months to quarter 2 of 2007. Access to the housing market is 350% worse currently than during 1996.

This is a significant increase from the most accessible period just over a decade ago, when couples only needed to save 21% of their earnings to meet the costs of an average home deposit and stamp duty.

According to a recent study by RICS, the average first time buyer couple, both on lower-quartile earnings of £25,899, will have to save 96% of their joint income in order to save an average deposit of £25,600.

A spokesperson for RICS stated that if potential first time buyers get onto the property ladder, they are faced with mortgage payments which take up a higher percentage of their income than at any time since 1990.

Property prices have increased by more than 11% a year since 1996, however, first time buyer incomes have only risen by 3.5% a year. This has resulted in buyers having to borrow larger amounts and 5 interest rate increases in the last 12 months is applying more pressure.

London, the south-east and the south-west are hit the worst as couples need to save 100% of their annual salary in order to save for an average deposit on a home. In Humber, Yorkshire and the north-east, this drops slightly to 73%.