Housing affordability 'worst since 1992'
Oct 04, 2006
Affordability for new houses is at its worst level since 1992, a new study claims.
The report from the Royal Institution of Chartered Surveyors (Rics) found that the cost of becoming a home buyer is almost the worst for more than two decades and home owners are struggling to pay for mortgages.
A two person household will now have to spend on average 22 per cent of their take-home pay on their mortgage, up from a low of 14.1 per cent in 1996.
A first-time buyer couple will have to save up the equivalent of 74 per cent of their joint take home pay in order to save the £29,200 needed for the up front buying costs on a typical home, pushing them against a property brick wall, Rics claims.
A Rics economist suggested that unless house building levels increase, and levels keep up with population growth and rising income and wealth, people will continue to find it difficult to access the housing market. However, mortgage broker John Charcol takes a different view of the current housing situation, stating that although houses are more expensive, the mortgage market has adapted to allow first-time buyers to borrow larger amounts with little up front capital.
Lenders can lend at much higher income multiples and in 1991 a single person buying a house would be able to borrow three and a half times their salary. A person who has got no financial commitments can now get five time their salary.
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