Posts with tag: affordability

Is there a Gender Property Gap when it comes to Mortgage Affordability?

Published On: September 19, 2017 at 8:13 am

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We’ve all heard of a gender pay gap, but is there a gender property gap when it comes to mortgage affordability on the average home?

Online estate agent eMoov.co.uk has highlighted the gap in mortgage affordability between men and women, based on the gap in their average salaries.

The deficit between the average salary for men and women, plus the ever-increasing cost of homeownership are two widely debated topics. So what happens when you combine the two?

eMoov has analysed the latest Office for National Statistics (ONS) data for the average wage over a ten-year period (2006-16) for both men and women, and then looked at their mortgage affordability, at 4.5 times that wage. The agent then highlighted the gap in purchase power between the two, showing mortgage affordability as a percentage of the average house price at the time.

Is there a Gender Property Gap when it comes to Mortgage Affordability?

Is there a Gender Property Gap when it comes to Mortgage Affordability?

The last ten years

Over the past ten years, typical mortgage affordability of male homebuyers has been 72% of the average house price – 15% more than for female homebuyers (57%). This deficit remained around this level until 2013. It peaked at 17% in 2009, with the make salary allowing 79% mortgage affordability on the average house price, to just 62% for women, with the higher threshold of affordability largely due to the market crash.

Since, the gap has started to close and today sits at 12%. But, with house prices again finding their way back to pre-crash peaks, mortgage affordability for the average salary has dropped to 65% for men and 53% for women.

Despite this gap, the high cost of UK homeownership means that, since 2006, both average wages have lagged behind house prices where mortgage affordability is concerned.

By property type

The 2009 slump in house prices saw the highest mortgage affordability as a proportion of the average property value, with men tipping 52% for a detached property, 83% for a semi-detached home, 97% for a terraced house and 91% for a flat. In contrast, female mortgage affordability only hit 41% for a detached house, 65% for a semi, 76% for a terraced home and 71% for a flat.

Today, that has fallen again, with men sitting at 43% of the average value of a detached home, 69% of a semi, 80% of a terrace and 72% of a flat. For women, this drops to 35% of a detached house, 56% of a semi, 65% of a terrace and 58% of a flat.

The Founder and CEO of eMoov, Russell Quirk, comments on the findings: “It’s a welcome sight that the gap in salary between men and women, and in turn mortgage affordability, has started to close over the last few years, but a gap remains none the less. Homeownership provides enough hurdles for the current generation of first and second time buyers as it is, without gender having to play a role.

“The only saving grace is that many are in the position to buy with their partner and so the combined mortgage affordability of both is enough to see them onto that first rung of the ladder.”

He adds: “While the increasing growth in property values due to a severe lack of supply is an issue, the second side to it is the lack of growth in the average wage. If this was addressed, it would at least go some way in bridging the gap for those struggling to buy at present.”

Average UK House Price 6.05 Times Typical Earnings

Published On: May 12, 2017 at 8:15 am

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The average UK house price is currently 6.05 times the typical earnings in the country, according to the latest research by leading hybrid estate agent eMoov.co.uk.

The agent also found that there is an average gap of £6,111 between the current typical wage and the wage required for a general mortgage approval of 4.5 times the borrower’s salary.

eMoov compared the latest Land Registry house price figures with the recently updated Office for National Statistics wage data, to highlight where across the UK presents the greatest obstacle for aspiring homebuyers, both in terms of the wage to house price ratio, and the reality gap between the average wage available and the wage required to secure a mortgage in each area.

The average property price was divided by the typical earnings to find the wage to house price ratio for each area. eMoov then calculated the mortgage deficit by deducting a 10% deposit from the average house price, before dividing it by 4.5 – the standard multiple of a salary required for mortgage approval. The agent then worked out the difference between the average salary in each area and the salary required to purchase a property at the average house price for that location.

The full data is available here.

The worst locations by average wage to average property price

With London house prices continuing to spiral out of control it is no surprise that – with the exception of Purbeck in Dorset – the areas for the worst house price to earnings ratios are in the capital. It is by far the worst region in the UK, with the average house price standing at 12.05 times the typical wage.

Hackney is the worst borough, with the average house price of £575,511 a huge 17.03 times the average wage of £33,800. Brent (16.37) and Haringey (16.21) are also home to an average property price over 16 times the typical wage in the area.

Average UK House Price 6.05 Times Typical Earnings

Average UK House Price 6.05 Times Typical Earnings

Waltham Forest (15.69), Ealing (14.77), Harrow (14.73) and Barnet (14.18) are amongst the other worst offenders, while Purbeck is the only non-London entry in the top ten, at 14.12.

Hammersmith & Fulham (14.06) and Newham (13.18) complete the top ten worst locations.

Outside of London, the gap closes slightly, although all of the areas in the top ten are home to house prices of more than 12 times the average earnings.

After Purbeck, the worst area is Oxford, where the average house price of £408,488 is 13.18 times the typical salary of £31,000. South Bucks (13.08), Hertsmere (12.95), Three Rivers (12.81), South Hames (12.65), Broxbourne (12.53), Christchurch (12.47), Epsom and Ewell (12.44), and Brighton and Hove (12.43) complete the top ten worst areas outside the capital.

The worst locations by gap in earnings for mortgage requirements 

As with the wage to house price ratios, the top ten worst locations where the gap in earnings for mortgage requirements is concerned are all in London, with the exception of one.

Despite having some of the largest wages on offer in the capital, the high price of property in Kensington and Chelsea, Westminster and Camden means that the gap between the average wage on offer and the wage needed to secure a mortgage is over £100,000 – £162,086, £131,126 and £106,138 respectively.

Hammersmith & Fulham (£99,476) and Hackney (£81,302) are also home to some of the largest deficits in London, while South Bucks is the only entry in the top ten outside of the capital, with a gap of £79,314 between the average salary and the salary needed for a typical mortgage approval.

Haringey (£77,813), Richmond (£74,924), Islington (£74,530) and Wandsworth (£71,190) complete the top ten.

The best locations by average wage to average property price

At the other end of the spectrum, the ten best areas are home to an average house price under five times the typical wage – although they are, for the large part, located in the north, Wales and Scotland, so not much hope for southern homebuyers.

With the average house price of £80,605 just 3.43 times the average wage (£23,500), Burnley is home to the smallest gap between the cost of buying a home and the available earnings on offer.

East Ayrshire (3.66), Inverclyde (3.67), Blaenau Gwent (3.74), West Dunbartonshire (3.76), North Ayrshire (3.85), Copeland (3.86), North Lanarkshire (3.91), Rhondda Cynon Taf (4.03) and County Durham (4.04) complete the top ten.

The best locations by gap in earnings for mortgage requirements

Burnley again takes the top spot where financial requirements for a mortgage are concerned. The average wage of £23,500 is £7,379 more than the 4.5 times requirement (£16,121) on the average house price of £80,605.

All of the top ten locations exceed the financial mortgage requirements by more than £4,000, but, again, are for the largest part in the north and Scotland.

They are: Copeland (£7,055), Inverclyde (£7,016), East Ayrshire (£6,262), West Dunbartonshire (£6,265), North Ayrshire (£5,819), Blaenau Gwent (£5,305), County Durham (£4,731) and Hartlepool (£4,700).

By region 

As mentioned, London is by far the worst region, with the South West (9.55) surprisingly the second worst. The South East (9.50) and the East of England (9.33) are more predictably the next largest ratios. The North East is the best, despite its lower wage, with the average house price of £123,749 just 4.95 times the typical earnings.

London is also home to the largest gap between average wage and the wage needed for mortgage approval, at £55,541, while the North East is the only region with a positive difference, of £250.

The Founder and CEO of eMoov, Russell Quirk, comments on the data: “When London is thrown into the spotlight in terms of the unaffordability of its property market, many are quick to highlight that the wages on offer are higher in the capital. However, this research shows that, despite this, the gap between what hopeful London buyers are earning and what they are having to pay for a property is still way out of kilter and climbing. Not only this, but the reality gap between the average wage and wage required for mortgage approval is staggering. Of course, many of us buy with a partner or friend in order to get on the ladder, but even when sharing this burden, there is still a considerable financial mountain to climb.

“It also shows that, elsewhere around the nation, there is almost a direct correlation between what a property goes for and the earnings on offer. But regardless of where you live and what you earn, there has been a serious unbalance between the escalating price of property and the stagnating wages available to UK buyers. This really needs to be addressed to help current and future UK buyers get a foot on the ladder and continue climbing it.”

Buy-to-Let Lenders Favouring Percentage-Based Fees

Published On: April 20, 2017 at 8:11 am

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Buy-to-Let Lenders Favouring Percentage-Based Fees

Buy-to-Let Lenders Favouring Percentage-Based Fees

Percentage-based fees for arranging loans have become the new standard among buy-to-let mortgage lenders, according to the latest Buy-to-Let Mortgage Costs Index from Mortgages for Business.

Flat fees have long been popular as a way for lenders to maintain profitability, while still offering competitive rates. Meanwhile, other products instead carry a variable fee based on the loan amount.

Figures from the first quarter (Q1) of 2017 show that 44% of all buy-to-let mortgage products now carry percentage-based fees, overtaking flat fees (41%) for the first time in four years.

There was also a rise in the average flat fee, up to £1,446 from £1,397 in Q4 2016. Together, these changes have increased the average effect of mortgage charges to 0.64%. This compares to 0.62% in Q4, and is the strongest effect recorded since the first half (H1) of 2015.

Steve Olejnik, the COO of Mortgages for Business, comments: “With the challenges lenders have faced to generate business in the face of successive blows to the buy-to-let sector, it is only natural that many have chosen to focus on cutting rates at the cost of increased fees. The recent trend towards percentage-based fees is an example of lenders doing exactly this, as fees of this type become more expensive for larger loans.”

The index also shows that there has been a shift in the pricing of five-years fixed rate products. Although products available at 75% loan-to-value (LTV) and below remained on trend, five-year fixed at higher LTVs saw a 0.2% rise in headline rates.

This was fuelled by an influx of investor demand following tighter Prudential Regulation Authority (PRA) affordability guidelines, which only partially apply to long-term fixed rates.

Landlords, have you seen a move towards percentage-based fees from buy-to-let lenders in recent months? Will this affect your decision to take out a loan?

Housing Affordability has only Improved for 2% of Occupations since 2011

Published On: March 24, 2017 at 9:15 am

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Housing affordability has only improved for 2% of occupations since 2011, due to soaring house prices and stagnant wages, according to new research from Private Finance.

The independent mortgage broker’s analysis of average gross annual earnings and house prices from 2011-16, using official Government data, shows that, across 304 occupations for which figures are available, just five have enjoyed enough wage growth to make the average home more affordable.

These five occupations are: Aircraft pilots and flight engineers; electronics engineers; rubber process operatives; energy plant operatives; and merchandisers and window dressers.

Housing Affordability has only Improved for 2% of Occupations since 2011

Housing Affordability has only Improved for 2% of Occupations since 2011

Among this select group, aircraft pilots and flight engineers have enjoyed the greatest five-year pay rise (£22,507). As a result, the average UK house price (£212,748 in 2016) amounted to 2.4 times their gross annual earnings of £89,317, down from 2.5 times in 2011, when they earned £66,810 and the average home cost £167,888.

Electronics engineers have enjoyed the greatest percentage gains (40%) in their gross annual pay over the five years between 2011-16. This pay boost exceeds the 27% growth in house prices over the same period, and has improved their housing affordability from 5.1 times their income to 4.6.

However, despite enjoying percentage pay rises that exceed the 27% house price growth and the average 9% wage growth across all UK employees, the remaining professions in this group of five still need between 6.8 years and 11.5 years of earnings to match the average UK house price – another sign of what the Government has described as a broken housing market.

Private Finance’s analysis goes on to show that, with gross annual earnings of £21,100, the average UK employee needed eight years of earnings to match the average UK house price in 2011. Despite taking home £1,999 (9%) more in 2016, their higher earnings of £23,009 have been outpaced by rising house prices, leaving them needing 9.2 years’ income to afford the standard home.

Aircraft pilots and flight engineers also came out on top when comparing trends among the top ten UK occupations with the highest pay and the best housing affordability ratios.

As a result of their average £22,507 pay rise since 2011, the profession has seen gross annual earnings before bonuses (£89,317) overtake chief executives and senior officials (£84,275) to reach the top of the UK pay structure, as documented by the Office for National Statistics. This leaves them as the only professionals in the top ten earners to see their housing affordability improve since 2011.

All others, including IT and telecommunications directors, legal professionals and medical practitioners, have seen a measure of tightening in housing affordability, as their pay gains have been left behind by soaring house prices.

The Director of Private Finance, Shaun Church, comments on the findings: “The simultaneous squeeze on earnings and housing stock have piled pressure on many homebuyers, and there are few areas of the UK workforce that have seen their wages rise above the trend of property prices. Barring a few exceptions, even the highest earning professions have not seen their annual pay keep up and aren’t immune to the limits this can place on movement in the housing market, particularly where larger purchases are involved. This is especially true of those working in city hubs, where house price rises have far exceeded the average 27% over the last five years.

“Access to mortgage finance in a growing variety of shapes and forms is increasingly essential for many people to make headway at all levels of the property ladder. The changing nature of employment patterns also means the idea of a one-size-fits-all mortgage is becoming increasingly outdated for a large number of employees.”

He adds: “The rise in self-employment, coupled with trends in pay and bonuses, often means that the most suitable type of finance and the most appropriate lender can only be identified through a detailed assessment of personal circumstances and a knowledge of solutions that exist beyond the high street.”

Property prices/wages imbalance is growing

Published On: March 17, 2017 at 2:30 pm

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The latest ONS figures reveal that on average, workers in England and Wales are paying 7.6 times their annual salary on purchasing a property.

Between 1997 and 2016, the average price paid for a residential property in these two countries increased by 259%. During the same period, individual earnings rose by 68% in the same period.

Affordability

The gap between the most and least affordable parts of England and Wales has risen during the period, with affordability falling in all local authority districts.

Alarmingly, the least affordable areas are worsening at a faster rate than the most affordable, making the gap wider.

Shaun Church, Director at Private Finance, commented: ‘The yawning gulf between earnings and house prices highlights the extent to which the affordability crisis is worsening across the country. Limited access to mortgages at more than 4.5 times borrowers’ income means that, with the average house prices now 7.6 times greater than average earnings, buyers are having to find new solutions to get on the ladder – such as buying in couples, among friends or leaning on family for support.’[1]

‘Growing numbers have found themselves excluded from the property market, but fortunately, low interest rates and mortgage repayments have gone some way to ease the pressures they face,’ he continued.[1]

Young trouble

Moving on, Church observed that the imbalance between house price and earnings are particularly impacting on the young.

Property prices/wages imbalance is growing

Property prices/wages imbalance is growing

‘Younger would-be buyers are the biggest losers from the growing imbalance between house prices and earnings. The data reveals that in 1997 the average house price was just 3.6 times the average income, which would have been well within reach of a young couple looking to buy. The same couple looking to buy today would face an uphill struggle, and many find now themselves looking to their parents for help with a deposit or to act as a mortgage guarantor,’ Church noted.[1]

‘Prices and incomes have grown particularly out of sync in the London market, and it isn’t surprising that seven of the country’s ten least affordable areas are in the capital. In boroughs such as Kensington & Chelsea the typical house price is now a mammoth 38.5 times bigger than the average income, which puts getting a foot on the ladder out of reach of all but the wealthiest buyers. Such an imbalanced situation creates obvious temptations for policymakers to interfere with the market. However, it is absolutely imperative that they avoid destabilising the housing market for political ends, as was the case with the changes to Stamp Duty last year,’ he concluded.[1]

[1] http://www.propertyreporter.co.uk/finance/affordability-gap-widens-to-record-levels.html

 

Over one in four homes in is an unacceptable standard

Published On: October 17, 2016 at 10:05 am

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A shocking new survey from Shelter has revealed that over one in four homes in the UK do not hit acceptable living standards.

The charity’s new Living Home Standard looks at features such as cleanliness, safety, affordability and space.

Problems

Worryingly, the report found that affordability was the greatest issue and that people should be able to, ‘live and thrive’ in homes, not just ‘get by.’

Prime Minister Theresa May has recently said that the Government is to prioritise housing, doubling its affordable housing budget.

Shelter compiled the Living Home Standard through a series of workshops and questionnaires. The charity also received support from British Gas.

Measurements of homes hitting acceptable living standards were based on results from a survey of 1,961 adults across the UK.

Standards

The Living Home Standard measures five elements according to specific criteria. The concept of space was measured for example by having a sufficient number of bedrooms for the household, and having space for everyone to spend time in the same room together.

Other aspects of space include outdoor room and the amount of space children and adults have to work.

These five elements of the Living Home Standard were measured on:

Affordability: Factors such as how much money is left for peoples’ essentials following rental or mortgage payments

Living conditions: Assessing replies for words such as ‘warm’ and ‘secure’ when asking the participants to describe their home.

Space: Sufficient space was seen as critical for mental and social wellbeing

Stability: This was seen as the extent to which people feel that they can turn their property into a home.

Neighbourhood: Residing in an area where people feel safe and secure was also seen as very important. Living close to work, family and friends was also an important measurement.

Over one in four homes in is an unacceptable standard

Over one in four homes in is an unacceptable standard

Cutbacks

Of the five criteria, 27% of homes failed at least one of the affordability specifications. Shelter revealed that 24% of people were not able to save anything for unexpected outgoings after paying rent or mortgages. 23% worry about their rent or mortgage charges becoming unaffordable should they rise even slightly.

18% of people could not meet their housing fees if they did not cutback on essentials like food or heating. 20% said they have to cut back on social activities in order to meet costs.

In addition, over one in ten people live in homes that do not hit space criteria. This was particularly bad for renters in social housing. One in five said that space was inadequate, while one in four said that they did not feel in control of how long they could stay in their property.

Heart-breaking

Shelter has called for more stable rental contracts, lasting for at least five years to protect tenants against rent increases.

Chief executive of Shelter, Campbell Robb said: ‘It’s heart-breaking to think that so many people are having to make a choice between paying the rent and putting food on the table, or living in fear that any drop in income would leave them unable to cover their housing costs.’[1]

‘The sad truth is that far too many people in Britain right now are living in homes that just aren’t up to scratch – from the thousands of families forced to cope with poor conditions, to a generation of renters forking out most of their income on housing each month and unable to save for the future,’ he added.[1]

[1] http://www.bbc.co.uk/news/uk-37655908