The gap between the mortgage required by the average first-time buyer and the mortgage they are eligible for has increased by an estimated 552% over the past ten years, according to new research by London mortgage broker, Alexander Hall.
The survey also reveals that the average first-time buyer falls short by over £43,000 in the current market due to growth in earnings and failing to keep pace with house prices.
Hall’s analysis looked at 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.
It revealed that ten years ago, the average first-time buyer house price was £162,362. Using a 15% deposit of £24,354, this meant the average first-time buyer required a mortgage of £138,007.
At the time, the average annual income of a first-time buyer was £29,181, they could get a mortgage worth £131,315, based on an income to lending multiple of 4.5 times earnings.
In 2024, the average first-time buyer house price has jumped 52%, so a 15% deposit is now £36,986, with the average first-time buyer needing a mortgage loan to the tune of £209,590 – an increase of £70,000 over the past ten years.
During the same period, the average income of a first-time buyer rose by only 26% to £36,885 per year. With a 4.5 times income applied, this makes them eligible for a mortgage loan of only £165,983.
This has created a gap between the mortgage the average first-time buyer requires and the mortgage they are eligible for has jumped by £36,914 – a 552% increase against a decade ago.
Stephanie Daley, Director of Partnerships at Alexander Hall, commented: “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 4.5x 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.
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 5.5x income, with a 10% deposit. Nationwide went a step further at 6x income at 95% LTV.
For FTBs 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 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 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.”