Buyers in the UK are faced with having to borrow more than six times their salary to buy a home but in London it is 12 times and in one region of Dorset it is 14 times the average salary.
The sheer extent of how unaffordable some parts of the country are revealed in new research from online estate agent eMoov which also suggests that the gap between the current average wage and what earnings are needed for a general mortgage is £6,111.
The Bank of England imposes an income cap for home borrowers which means that mortgage lenders typically lend up to 4.5 times the salary of the applicant or applicants as part of regulations which mean they are tested to make sure they can repay their loans.
The research found that London is the least affordable location in the country with average house prices more than 12 times the average wage. But in Purbeck, Dorset, the difference is even greater at 14 times the average salary.
Hackney has the worst gap in London where the average house price of £575,511 is 17.03 times the average wage of £33,800, followed by Brent at 16.37, Haringey 16.21, Waltham Forest 15.69, Ealing 14.77 and Harrow 14.73.
Outside of London, after Purbeck the least affordable location in terms of wages to price ratio is Oxford where the average house price of £408,448 is 13.18 times the average salary of £31,000, followed by South Buckinghamshire at 13.08, Hertsmere at 12.95, Christchurch at 12.47, Epsom and Ewell at 12.44 and Brighton and Hove at 12.43.
At the other end of the scale, the 10 best areas where the average house price is under five times that of the average wage are largely located in the North of England, Wales and Scotland, led by Burnley with a gap of 3.43. It is 3.66 in East Ayrshire, 3.67 in Inverclyde, 3.76 in West Dunbartonshire and 3.85 in North Ayrshire, all in Scotland. Blaenau Gwent in Wales has a gap of 3.74 and County Durham 4.04.
According to Russell Quirk, chief executive of eMoov, the research shows that despite wages being generally higher in London the gap between earnings and what is needed to buy is still high.
‘The reality gap between the average wage and wage required for mortgage approval is a 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,’ he said.
He pointed out that it also shows that elsewhere around the country 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,’ he added.
