Analysis from Alexander Hall found that 10 years ago, the average first-time buyer house price was £162,362, and with a 15% deposit of £24,354, the mortgage required was £138,007.
With the average annual income coming to £29,181 at the time, first-time buyers could obtain a mortgage of £131,315 based on income multiples of four-and-a-half times earnings.
This meant first-time buyers had a shortfall of £6,693 for their required mortgage, which Alexander Hall said was a “small, but largely traversable obstacle” to getting onto the property ladder.
However, the first-time buyer of today would have a shortfall of £36,914.
With the average price of a first-time buyer home rising 52% in the last decade, a new homeowner would need a mortgage of £209,590. This would be over £70,000 more than they would have needed a decade ago.
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However, based on the typical income of £36,885 today, a first-time buyer with a 15% deposit of £36,986 would only be able to get a mortgage of £165,983.
This would make them £43,607 short of the mortgage required, a difference of £36,914 or 552% more than 10 years ago.
First-time buyer challenges remain despite lender support
Alexander Hall said even with lenders amending criteria to help, such as Nationwide allowing first-time buyers to borrow up to six times their income with a 5% deposit, there was still a shortfall.
The firm said with a 5% deposit, the average first-time buyer would need a mortgage of £234,247. However, even with a loan that is six times their income, they would only be able to get a mortgage of £221,311.
This would see them still falling short by £12,936.
Stephanie Daley, director of partnerships at Alexander Hall, 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 four-and-a-half times loan to income (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 first-time buyers can achieve has continued to widen, now with the average first-time buyer falling close to £13,000 short.”
Daley said: “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 ‘first-time buyer boost product’ at five-and-a-half times income, with a 10% deposit. Nationwide went a step further at six times income at 95% LTV.
“For first-time buyers now, compared to 10 years ago there are more innovative lenders available. Lenders such as Generation Home offering ‘deposit booster’ and ‘income booster’ products, Skipton with their 100% LTV Track Record product, Accord offering a 99% LTV product, to name just a few. We’ve also recently seen more lenders getting comfortable with new builds at higher loan to value [LTV] than we ever have before, which helps to ease deposit requirements in this space.
“All the above highlights the importance of seeking impartial mortgage advice. We often speak to prospective first-time buyers who have no idea of the schemes available to them to help when getting onto the ladder.”
