Today’s mortgages can absorb up to 50% of FTB’s income
According to a recent study conducted by Barclays bank, the average first time buyer will devote almost 1/3rd of their total income towards their home loan commitments, as a result of market strength and interest rates.
The focused study, profiled approximately 150,000 (mid to late twenties) active users of Barclays services, who are currently repaying a mortgage to a number of different lending institutions. As expected, the results did tend to vary depending on geographical location, however a 33% wage to mortgage ratio was about average.
However, certain parts of the country were hit considerably worse. It was discovered that FTB’s who reside in London are committing up to ½ of their annual income towards mortgage costs, substantially reducing their standard of living.
According to analysts, the situation is likely to get far worse, before it starts to improve (if at all). Experts suggest that due to increasing interest rates, and overall market strength, it is highly likely that the average age of the first time buyer will shift from twenty something to thirty something in coming years.
The general consensus suggests that the biggest hindrance for FTB’s stems from an inability to gather an adequate deposit. Numerous home loan lenders are offering products devised to help borrowers in such a situation, however very few first time buyers are prepared to commit to 100% (or even 125%) mortgages. As a result, FTB’s will live with their parents for longer and/or rent low cost housing in order to gather enough money, to form at least 10% of their prospective mortgage value.
If such a theory proves to be correct, it will likely have a very noticeable effect on the housing market, which could cause a ripple of instability.
