Advertisement
Housing

We spoke to mortgage experts about how much you need to earn to buy a house

These aren’t sums of money you can save by giving up Netflix, sorry.

TV presenter Kirstie Allsopp has managed to inflame just about everyone by telling young people to give up Netflix, gym memberships and holidays if they want to buy a house. Oh, and to move somewhere cheaper.

With house prices rising and energy bills soaring, the comments struck a nerve – the same nerve that is struck every time another “How I bought my home” money diary is published.

It’s the debate that never dies – and never will so long as there’s a housing crisis.

Young people are told to sacrifice anything resembling luxury, live with their parents until the grey hairs come through, and run away from avocados if they want to own a house.

But what’s the reality? The Big Issue spoke to mortgage advisors about just how much you’d need to earn to buy a house.

You need to be earning a total of almost £60,000 a year to afford the average house in the UK

UK house prices reached a new record in January, it was announced this week. The average price now sits at £276,759.

Advertisement
Advertisement

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.

Subscribe to The Big Issue

From just £3 per week

Take a print or digital subscription to The Big Issue and provide a critical lifeline to our work.

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.

Big Issue Foundation

Donate to support vendors today

Your gift today will mean Big Issue vendors will get the support they need to progress forward in life. You will be supporting vendors in key areas including housing, finance, mental health and employment.

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.

Advertisement

Bigger Issues need bigger solutions

Big Issue Group is creating new solutions through enterprise to unlock opportunities for the 14.5 million people living in poverty to earn, learn and thrive. Big Issue Group brings together our media and investment initiatives as well as a diverse and pioneering range of new solutions, all of which aim to dismantle poverty by creating opportunity. Learn how you can change lives today.

Recommended for you

Read All
Homeless people get creative with self-portraits for new photo exhibition
Homelessness

Homeless people get creative with self-portraits for new photo exhibition

The number of children living in temporary accommodation in Scotland surges by almost a fifth
Homelessness

The number of children living in temporary accommodation in Scotland surges by almost a fifth

What is Housing First and how can it solve homelessness in the UK?
Housing

What is Housing First and how can it solve homelessness in the UK?

Buying a home in the UK is more expensive than ever. When will house prices go down?
House Prices

Buying a home in the UK is more expensive than ever. When will house prices go down?

Most Popular

Read All
Oil giants Shell and BP have been handed £700m of taxpayer cash despite bumper profits
1.

Oil giants Shell and BP have been handed £700m of taxpayer cash despite bumper profits

What are the risks of Don't Pay UK? We asked a leading lawyer
2.

What are the risks of Don't Pay UK? We asked a leading lawyer

How broken is the UK's public transport? I spent all day on buses to find out
3.

How broken is the UK's public transport? I spent all day on buses to find out

Sadiq Khan's Right to Buy-back scheme leads to return of 1,500 council homes
4.

Sadiq Khan's Right to Buy-back scheme leads to return of 1,500 council homes

Keep up to date with the Big Issue. The leading voice on life, politics, culture and social activism direct to your inbox.