Potential first-time buyers face a “bleak picture” as only one in eight can afford to buy an average property in their area.
Just one per cent of the UK’s lowest earners – those earning less than £22,850 a year – had the funds to get onto the property ladder, new data from Skipton Group show.
Even among the top 25 per cent of earners – those on £71,250 a year or more – just 44 per cent could afford to buy their first home in their local area.
High rent and energy prices are two of the reasons that people said made it difficult to save for a deposit.
The new index, compiled by Oxford Economics, found renters are four times less likely to be able to buy than homeowners.
It measured people’s ability to buy and run a home in England, Wales and Scotland, taking into account the average-priced first-time buyer home in different areas.
Unsurprisingly, one of the worst areas in the UK for affordability is London – due largely to high house prices. The average price of a property sold on Zoopla in the capital last year was £695,291.
Affordability levels for first-time buyers are also particularly bad in the West Midlands, thanks to a combination of low deposit levels and moderate house prices, and Wales, where incomes are lower.
People have the best prospects of getting a home in Scotland due to lower house prices, and the East of England thanks to above-average income to house price ratios.
‘We’d be giving everything up but still paying a premium’
Kate Edge, 27, told i she was forced to move out of London because it was “completely unaffordable” to buy a home there with her fiancé.
The software engineer said when she looked on Rightmove, she struggled to find two-bedroom properties in her area below the £500,000 mark.
Even properties on the outskirts of the city were only slightly cheaper and the commutes into work were longer.
“We’d be giving up everything we like about London but still paying a premium,” she said.
The couple chose to move to Brighton to rent there for a while before buying, and say they have spoken to “so many people” in their area who also moved from London because of affordability issues.
But they soon found the seaside resort was unaffordable to buy a home in too. Two-bed flats in the area often had “really high” service charges of up to £4,000 a year on top of the mortgage repayments, while there were few houses in their price range.
Kate and her partner Brendan, who works in the video game industry, have been saving for the last seven to eight years and have now got a deposit.
The main problem, she says, is that “on paper” it appears they can afford some properties but it would involve them paying £1,000 more in mortgage repayments than they are currently spending on rent.
Significant proportion paying ‘unaffordable’ rents
A recent report by the Building Societies Association found the number of people who want to buy a home but don’t think they would be able to has increased in the last four years.
The proportion of people reporting being unable to buy went up from 25 per cent in March 2020 to 32 per cent in March 2024.
Much of this is due to skyrocketing rents making it harder for people to save up for a deposit. Average monthly rents in England have hit £1,276 – an 8.8 per cent increase year-on-year – according to figures released in February by the Office for National Statistics.
Global affordability standards suggest housing costs should account for no more than 30 per cent of your take-home pay.
But Skipton’s research found nearly four in 10 renters are spending 45 per cent or more of their income on essential housing costs.
Almost 20 per cent of renters are spending more than 60 per cent of their income on housing – roughly double the amount considered affordable.
Of this group, only 7 per cent have enough savings to afford the deposit on the average first-time buyer property in their area.
The problem of being unable to afford a deposit is largely unique to potential first-time buyers, as less than one per cent of people who already own a home struggle with affording a deposit.
Skipton’s chief executive Stuart Haire said his company’s findings “paint a bleak picture, notably for first-time buyers”.
“The combination of high housing costs, insufficient savings, and significant regional disparities underscores the urgent need for collaborative and targeted interventions to support aspiring homeowners,” he said.
Things unlikely to get better until 2026
Despite some signs of the cost of living crisis easing, housing affordability is expected to remain a large problem for some time.
Skipton said there are “limited signs of improvement on the horizon”, estimating that things are unlikely to get better until the end of 2026.
High energy prices and increased mortgage repayments are keeping costs high for the timebeing.
However, interest rates are expected to fall and have a knock-on effect on mortgage repayments in the coming months, while energy prices are also forecast to be 7.3 per cent lower by the end of 2026, Skipton said.
The situation is less promising for renters, as it’s predicted wages will not keep pace with rental price increases.