Homeownership is currently unattainable for younger generations

In fact, the gap between earnings and house prices is now so large that homeownership is generally unattainable for most single people. While the gap has slowly started to close*, it’s still a long way off from where it needs to be.

Recent research by Go.Compare has put the scale of the problem facing first-time buyers into perspective. The HomeOwners Alliance says that you shouldn’t spend more than 28% of your gross earnings on mortgage repayments, but this means you’d need a salary of £56,476 in order to afford the average house price of £270,000 (as of December last year) by yourself.

There’s only one industry in the whole country, the finance and insurance activities industry, where the average salary is high enough to match this.

And that only covers the issue of repaying the mortgage. The primary problem for many first-time buyers, of course, is being able to save enough for a deposit in the first place. With living expenses remaining extremely high, many renters simply don’t have enough cash left over to put towards this at the end of the month.

The result of this is that many people have started to give up on the prospect of ever owning a property. Go.Compare’s research also found that over half (55%) of non-homeowners don’t think they’ll ever be able to afford their own home. In comparison, just over a third (37%) remained confident that they will be able to buy a property at some point.

There could be knock-on effects of this as well, as it’s likely that some buyers are overstretching themselves as a result of these high costs.

While the HomeOwners Alliance says you shouldn’t spend more than 28% of your income on mortgage repayments, how many buyers are actually sticking to this? If many are pushing their finances to the limit to achieve homeownership, could this be leading to poorer living standards in the short-term and potentially more financial problems for them further down the line?

This is a problem that won’t go away until house prices become more in line with salaries, which is only likely to be achieved with a substantial increase in affordable housing. This won’t be resolved overnight, so there also needs to be more support for first-time buyers in the interim, otherwise the housing system risks becoming broken beyond repair for younger generations.

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Nathan Blackler is a home insurance & utilities expert at Go.Compare with a 15-year history in the industry

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