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Horncastle First Time Buyers Mortgages taking 27.7% of their Wages

Article Simon Jory 2017-06-06
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Horncastle First Time Buyers Mortgages taking 27.7% of their Wages

I received a very interesting letter the other day from a Horncastle resident. He declared he was a Horncastle homeowner, retired and mortgage free. He stated how unaffordable Horncastle's rising property prices were and that he worried how the younger generation of Horncastle could ever afford to buy?

He went on to ask if it was right for landlords to make money on the inability of others to buy property and if, by buying a buy to let property, Horncastle landlords are denying the younger generation the ability to in fact buy their own home.

Whilst doing my research for my many blog posts on the Horncastle Property Market, I know that a third of 25 to 30 year olds still live at home. It's no wonder people are kicking out against buy to let landlords; as they are the greedy bad people who are cashing in on a social woe. In fact, most people believe the high increases in Horncastle's (and the rest of the UK's) house prices are the very reason owning a home is outside the grasp of these younger would-be property owners.

Average Age of First Time Buyers

However, the numbers tell a different story. Looking of the age of first time buyers since 1990, the statistics could be seen to pour cold water on the idea that younger people are being priced out of the housing market. In 1990, when data was first published, the average age of a first time buyer was 33, today it's 31.

Age Distribution of First Time Buyers

Nevertheless, the average age doesn't tell the whole story. In the early 1990's, 26.7% of first-time buyers were under 25, while in the last five years just 14.9% were. In the early 1990's, four out of ten first time buyers were 25 to 34 years of age and now its six out of ten first time buyers.

Although, there are also indications of how un-affordable housing is, the house price-to-earnings ratio has almost doubled for first-time buyers in the past 30 years. In 1983, the average Horncastle home cost a first-time buyer (or buyers in the case of joint mortgages) the equivalent of 2.3 times their total annual earnings, whilst today, that has escalated to 4.4 times their income (although let's not forget, it was at 4.8 times their income for Horncastle first time buyers in 2007).

Again, those figures don't tell the whole story. Back in 1983, the mortgage payments as percentage of mean take home pay for a Horncastle first time buyer was 23.5%. In 1989, that had risen to 51.5%. Today, it's 27.7% ... and no that's not a typo ... 27.7% is the correct figure.

Mortgage Payments as a Percentage of Mean Home Pay for a Horncastle First Time Buyer

So, to answer the gentleman's questions about the younger generation of Horncastle being able to afford to buy and if it was right for landlords to make money on the inability of others to buy property? It isn't all to do with affordability as the numbers show.

And what of the landlords? Some say the government should sort the housing problem out themselves, but according to my calculations, £18bn a year would need to be spent for the next 20 or so years to meet current demand for households. That would be the equivalent of raising income tax by 4p in the Pound. I don't think UK tax payers would swallow that.

So, if the Government haven't got the money... who else will house these people? Private Sector Landlords and thankfully they have taken up the slack over the last 15 years.

Some say there is a tendency to equate property ownership with national prosperity, but this isn't necessarily the case. The youngsters of Horncastle are buying houses, but buying later in life. Also, many Horncastle youngsters are actively choosing to rent for the long term, as it gives them flexibility – something our 21st Century society craves more than ever.

Sources:

  1. Stats on First Time Buyers come from the office of National Stats
  2. Stats on Affordability come from Nationwide B/Soc for your Area
  3. £18bn for 20 years calculation - Denton House Research
  4. 4p in the £ income tax – calculated using Bank of England and Treasury stats

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Simon Jory

Simon Jory

Simon has been in Estate Agency for over 32 years and is a Fellow of the National Association of Estate Agents. Having working in all kinds of changing market conditions he is well placed to advise on how best to sell your home.

Anne Pearce

Anne Pearce

Anne prides herself on working to the highest standards and believes everyone should receive the best possible customer service. With over 20 years' experience she will not miss and opportunity.

Dawn Bannister-Law

Dawn Bannister-Law

Prior to moving to Lincolnshire, Dawn was a valuer for more than 19 years in Bakewell in the Peak District. Dawn strongly believes buyers, sellers, landlords or tenants are all as important as each other

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