Solo buyers in London need 111% pay rise to secure a mortgage

According to the latest research by Benham and Reeves, solo buyers in the capital will need to increase their income by as much as 214% in some boroughs if they want to be in with a chance of securing a mortgage in the current market.

Related topics:  Mortgages,  London
Tabitha Lambie | Editorial Assistant, Property Reporter
17th August 2023
London House
"The problem buyers are facing is that wages have not kept up with house prices."
- Marc von Grundherr, director at Benham and Reeves

The London-based lettings and estate agent looked at how much more a solo buyer would need to earn in each borough in order to purchase a property based on: the current average house price in each borough; the current average earnings of those residing within that borough; 80% mortgage having placed a 20% deposit; the average lending multiple of 4.5 times income. 

The data showed that the average London house price is currently £525,629 and a typical 20% deposit means the initial down payment comes to £105,126. This leaves £420,503 to be covered by a mortgage. On average mortgage providers lend up to 4.5x a buyer’s income so, the average solo buyer must earn at least £93,445.

However, in reality, the average London salary is only £44,190 so in order to afford the average London home, buyers would need an annual salary increase of 111%. While this may seem an impossible task, the situation becomes even more untenable when analysing London on a borough-by-borough level.

Benham and Reeves found that Kensington & Chelsea is the most expensive area to live in London with an average house price of more than £1.3m. Therefore, to secure a mortgage buyers would need a minimum income of £233,621 p.a. Currently, the average salary for residents in Kensington & Cheslea is £77,769 so buyers need an income boost of 200% to stand a chance of purchasing a home in this area.

In Camden, the average house price is £860,920 which is significantly cheaper than in Kensington & Chelsea.  But the average borough income is £48,707 which is far lower, leading to an earnings gap of 214%.

Likewise, the affordability gap exceeds 150% in Westminster (189%), Hammersmith & Fulham (164%), Haringey (164%), Barnet (161%), Islington (158%), and Hackney (152%). 

Wandsworth has the smallest pay gap at 72%, followed by Bexley (73%), Greenwich (82%), and Bromley (83%). 

Commenting on these findings, Marc von Grundherr, director at Benham and Reeves, has said:

“House prices increase over time. That is the general rule of thumb across the UK and especially in London. There will be a few blips here and there, but history shows that prices rise. 

“The problem buyers are facing is that wages have not kept up with house prices. They haven’t even come close. The pay gap has grown wider and wider, leaving us in the situation we’re in now where in some cases the average buyer needs to more than triple their incomes to even consider becoming a homeowner.”

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