In a recent interview on the BBC’s Today programme, the chair of NatWest (the second biggest mortgage lender in the country as of 2022) claimed that it “isn’t that difficult” to get on the property ladder at the moment. Understandably, this created significant criticism and noticing the potential for negative PR, he ‘clarified’ his statement later on and stated that he “did not intend to underplay the challenges”.
As of the 2021 census, over 47% of people in England and Wales own their home with a mortgage or through a shared ownership scheme. Of those remaining, many will be people trying to buy their first home. Unfortunately, it has become increasingly difficult for first-time buyers, with most mortgage holders aged 65 or over.
Waiting in line
Experts have stated that England needs at least 300,000 new properties each year to address the housing crisis and this figure was set by the Conservatives as a target to be achieved by the mid-2020s. Unfortunately, we are now in the mid-2020s, and are substantially off target, with only 173,690, houses completed in England in 2022-2023. The number of house completions also varies significantly by region. For example, the chart above shows a substantial difference between the North East and South East (8,600 and 30,980 in 2022-2023 respectively).
It’s important to note that not all houses will end up being used by owner-occupiers. Many houses are bought as second homes and stay vacant for months at a time. Others are converted to holiday lets (for instance, Airbnb) and there are those which are bought by buy-to-let landlords.
Availability goes down, which means prices go up.
However, it’s not just the number of houses that matter. It’s also suitability and affordability.
Accessibility and affordability
No government ruling makes the highest standard of accessibility mandatory. This means that new homes are not guaranteed to be accessible for any of the roughly 16 million disabled people in the United Kingdom. Bungalows are notoriously in short supply and ground floor flats are hard to find. Houses can be adapted, but this can be costly and time-consuming.
Affordable housing is a commonly used term but, for many people, it’s not affordable at all. The Affordable Housing Commission reported that many homes are unaffordable for those with mid to lower incomes. For a large section of the population, social housing is the best solution. However, there has been a continued decline in the availability of stock since the introduction of Right To Buy.
The following chart shows just how many people are waiting for the most affordable option:
House prices and mortgages
House prices in every region of the country are vastly higher than in 2010.
It is unsurprising that house prices in London are consistently the highest in the country. Yorkshire is much more affordable, with a current average for 2023 of £210,700.83 – an increase of £72,592.74 since 2010 (the second lowest increase of all regions). Most people (in particular first-time buyers) require a mortgage to buy their home – typically repaid over 25 years (although this can be longer). A standard, 10% deposit for the average house in Yorkshire and the Humber would be approximately £21,000, which is more than the average annual wage for someone in a Yorkshire-based customer service role. A 5% deposit (approximately £10,000) is still a substantial amount of money and would require a long time to save. In 2010, a 5% deposit would have only been around £7,000.
The added burden of ‘Trussonomics’
During the ill-fated premiership of Liz Truss, we saw the effects of her disastrous ‘mini-budget’. Many lower-rate mortgages were withdrawn from the market (over 40% removed within a week) so that only high-rate options were available, making it difficult, if not impossible, for people to get on the property ladder. It’s now well beyond the era of Trussonomics, but house prices and mortgage rates haven’t normalised:
“As the Bank of England’s recent interest rate hikes push up the cost of borrowing, average two-year fixed-rate deals reached 6.66 per cent on Tuesday, according to figures from Moneyfacts. That is higher than the 6.65 per cent seen on 20 October 2022 amid the turmoil that followed Ms Truss and Kwasi Kwarteng’s budget.”
The Bank of England openly state that they are using interest rates to reduce spending and therefore inflation. This doesn’t help people wanting to buy a home.
Income and expenditure
Even though there has been a hefty increase in the cost of gas and electricity in recent times, a mortgage is still the biggest monthly expense. I have said in previous articles that during my day job in local government, I have heard of eye-watering monthly payments going into the thousands.
Essential expenses burdening the average household include:
- £41.11 per person, per week on food and drink (£2,137 for each person, per annum)
- £160.66 on gas and electricity (£1,928 for the year)
- £172 per month for Council Tax (£2,065 for the year)
- An average monthly mortgage payment of £665 per month (£7,980 per year).
Mean gross earnings in the UK are £35,404, which is £28,211 after income tax and NI (although other deductions such as student loans may make take-home pay lower). After essential outgoings, this leaves very little to save for a deposit for a house.
Also remember that these are just averages. The government’s own figures show 36% of working-age adults are in relative or absolute poverty, meaning that it would take far more time to save for a deposit or even afford mortgage payments and life insurance.
Home ownership is becoming an impossible dream
A person wishing to buy their own home can work hard, strip their expenses down to the bare minimum and put some money away into savings. They might slowly build a pot and hope that they’re nearly there with a deposit. But, sadly, due to the increasing cost of living outstripping wage growth, and interest rates increasing the overall cost of a mortgage, many will be waiting a very, very long time. It would be natural to wonder if they will ever be able to afford their own home.
And, if they are disabled, things could be even worse.
The Conservative Party have historically claimed to be the party of home ownership. However, in reality, this is an increasingly cruel joke, with home ownership becoming impossibly difficult for more and more people during their time in power.
Labour is promising change though, with a proposal for much longer fixed rate periods on mortgages, making them far more affordable and less volatile for those who aren’t as well off. If Labour do win the general election and form a government, it will be interesting to see if this promise is kept, when it will be implemented and exactly what difference it will make.