You’re typically allowed to take out a mortgage of 4.5 times your salary. This can be on your own or combined salary as a couple.
If you can manage to find a lender willing to agree to a 5 per cent deposit – or around £13,800 – that’d mean borrowing roughly £260,000 as your mortgage. You’d have to be on a salary of around £58,000.
The median UK salary is £31,400, according to the ONS. The challenge of saving nearly £14,000 aside, these requirements may be within reach for an average couple.
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But it’s obviously not that simple
For starters, a five per cent deposit is a nice idea – but often not an attainable one. So says Gerard Boon, a partner at mortgage firm Boon Brokers.
“There may be lenders that allow a minimum deposit of 5 per cent of the purchase price for a new build property purchase, but those lenders are few and far between,” Boon told The Big Issue.
Instead, deposits are typically around 10 per cent to 15 per cent – although there are schemes which help towards this cost, including Help to Buy Equity Loans.
Affordability calculations can also take into account the amount of credit and borrowing commitments you have – if you have a lot, your “salary” is effectively lower when it comes to calculating the amount you can borrow.
However, depending on our criteria, you could be offered a mortgage of around 5.5 times your earnings, or as low as three times your earnings.
And what about in London?
Two words: Generational wealth. Unless you’ve got that, it’s not pretty reading.
The average house price in London is £705,783, according to figures from Zoopla. A five per cent deposit would set you back over £35,000 – and you’d need a salary of £148,998 to be eligible for the mortgage.
For the average price for a flat – £519,834 – you’re looking at £25,991 for a 5 per cent deposit, and a salary of £109,000 to afford the mortgage.
And what if you were earning, let’s say, £50,000 individually or as a couple? The maximum mortgage you could get would be roughly £225,000. That leaves you needing to find a £480,000 deposit to afford the average house.
Some schemes that bridge the gap mean you need a smaller mortgage. But the economic situation means carefully laid plans may fall apart.
Boon said: “In some cases in London, for example, properties are increasing at a rate that is actually greater than some people’s basic salaries.
“Therefore, even if they save for many years to buy a house, by the time they have saved up a large deposit sum, that type of property that they looked at may be unaffordable due to inflation.
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But I pay loads in rent. Why can’t I get a mortgage with smaller repayments?
It’s a common refrain: You’re allowed to pay someone else’s mortgage, but banned from getting your own.
Rhys Evans, a mortgage advisor at Green & Green, said it boils down to mortgage lenders being far more picky and careful than estate agents doing tenancy contracts.
“It’s just the system we’re in at the moment,” Evans told The Big Issue. “Obviously you need to be cautious because you don’t want to be paying too much and not be able to pay it and get your house repossessed.”
Will cutting back on anything which makes my life nice help?
Not having enough money is going to be a problem. Doubly so if you’re having to borrow just to make ends meet.
“We have found recently that young people tend to accumulate debts and adverse credit to fund their lifestyle,” Boon said.
“I would strongly encourage everyone to live within their means to maximise their mortgage affordability when buying a property.”
Evans said it could take a year or two for prospective homeowners to get their finances in a shape where they can even apply for a mortgage.
“Not many people know their finances inside out now. If someone’s got a new car, that will eat into their affordability,” he said.
He said much of his job involved “explaining every little detail of the house purchase – how what you earn, your credit commitments, and your deposit, all link together to allow you to borrow a certain amount of money.”
But, with house prices sky high, can you sacrifice your way to a house? Some quick napkin maths shows that if you were to give up coffee, cancel the gym, and forego a holiday for a year, you’d save around £2,000.
So, yes, you could afford the deposit on a house in London.
If you lived like this for 17 years – and earned £150,000 a year.