"We’re seeing more lenders continue to think outside the box and drive innovation within the sector in order to assist homebuyers with their aspirations of homeownership. "
- Stephanie Daley, director of partnerships at Alexander Hall
Just 8% of local authorities across Britain are home to an average house price that falls within the threshold of affordability when it comes to potentially obtaining a mortgage.
London mortgage broker Alexander Hall analysed average earnings data across each area of Britain before looking at whether or not homebuyers had a realistic chance of climbing the ladder, based on securing a mortgage with a 15% deposit on the average house price with an average income multiple of 4.5x income.
The research shows that just 8% of local authorities are currently home to an average house price and mortgage loan requirement that sits within the affordability threshold of 4.5 times the average earnings of an individual person.
The research also shows that in five out of 12 British regions, there isn’t a single local authority where an individual home buyer would secure a mortgage and purchase based on 4.5 times earnings versus the average price of a home. These are the East Midlands, East of England, London, South East and South West.
When it comes to the greatest degree of potential mortgage eligibility, Scotland ranks top, where 35% of all local authorities are home to an average house price that falls within the lending criteria of 4.5 times the average income.
The North East ranks second, with 33% of all local authorities remaining theoretically affordable for a lone buyer, followed by the North West (17%), Wales (14%), Yorkshire and the Humber (13%) and West Midlands (3%).
The research by Alexander Hall also demonstrates the importance of a joint income when attempting to climb the property ladder.
When adjusting the figures to account for a second average income, homebuyers across 82% of all local authorities across Britain would then be able to cover the average cost of a home at 4.5 times their joint income.
At a regional level, this climbs to 100% of local authorities in the East Midlands, North East, North West, Scotland, Wales, the West Midlands and Yorkshire and the Humber.
Whilst some local authorities still remain out of reach for homebuyers with joint incomes, the majority of areas in the East of England (79%), South West (70%) and South East (63%) also sit within the boundaries of affordability.
However in London, even with a joint average income, the average homebuyer in the capital can still only afford to purchase in 30% of local authorities based on 4.5 times this joint income versus the average house price.
Stephanie Daley, director of partnerships at Alexander Hall, commented: “Higher interest rates have somewhat dampened property market performance in recent years and we’re only now seeing house prices start to recover with respect to consistent levels of positive growth.
"Despite this, property values remain close to historic highs and affordability continues to be a key issue for many homebuyers. This is down to the fact that earnings growth simply hasn’t been sufficient enough to help bridge the gap and so for many, what they are able to borrow isn’t sufficient enough to cover the value of the home they wish to buy.
"As a result, we’re seeing more lenders continue to think outside the box and drive innovation within the sector in order to assist homebuyers with their aspirations of homeownership. This includes initiatives such as enhanced affordability, allowing some borrowers to potentially secure up to 5.5 times their income.
"This extra leverage can make all the difference in many locations across the market, or it can help existing homeowners when it comes to creating that extra bedroom or all important outdoor space.
"By speaking to a mortgage adviser we can look to maximise the income used for affordability and use deals with more generous affordability assessments in order to get buyers into their dream home.”
