Digging the Latest Small Business News

+1 202 555 0180

Have a question, comment, or concern? Our dedicated team of experts is ready to hear and assist you. Reach us through our social media, phone, or live chat.

Nationwide: Despite Wage Increases, Average Earners Still Struggle with Unaffordable House Prices

Nationwide, the UK’s largest building society, has reported that average house prices are still out of reach for the typical earner. Despite recent wage increases and a decrease in house prices from their record high in summer 2022, the affordability of housing remains stretched.

According to Nationwide’s house price index, a greater proportion of take-home pay is now going towards mortgage payments. For someone earning the average UK income and looking to purchase their first home with a 20% deposit, their monthly mortgage bill would equate to 37% of their end pay packet. This is higher than the long-standing average of 30%.

The main factor contributing to this unaffordability is the rising cost of mortgages. With the Bank of England raising interest rates to 5.25% in an effort to bring down inflation, mortgage costs have become more expensive. In late 2021, the interest rate on a five-year fixed-rate mortgage for a borrower with a 25% deposit was 1.3%. However, this has now increased to around 4.7%.

While wage growth has outpaced inflation in recent months and house prices are 3% lower than their peak two years ago, the rise in mortgage costs has exacerbated the issue of unaffordability.

Data from the Resolution Foundation, a living-standards thinktank, further highlights the struggle for potential homebuyers. Despite a 6% increase in basic pay in the three months to April and inflation at 2.3% in the same month, the foundation found that weekly wages have only increased by £16 in the past 14 years when adjusted for inflation.

Compounding the problem is the fact that UK house prices have started to rise again, with a 1.5% increase last month compared to June 2023.

Nationwide also reported a decrease in house-buying transactions over the past year, with a roughly 15% decline compared to 2019. Transactions involving a mortgage have decreased even further, by nearly 25%. On the other hand, cash transactions have seen a 5% increase from pre-pandemic levels.

The Bank of England released figures on Monday morning showing a continued decrease in mortgage approvals. In May, there were 60,000 approvals, down from 60,800 in April. Additionally, the amount borrowed for home purchases decreased from £2.2bn in April to £1.2bn in May.

The same data also revealed an increase in personal lending, such as credit card debt and personal loans, indicating a rise in consumer demand.

Regionally, Northern Ireland saw the fastest house price growth at 4.1% over the three months from April to June. In contrast, it became 1.8% cheaper to buy a house in East Anglia over the course of the year, according to Nationwide’s figures.

Share this article
0
Share
Shareable URL
Prev Post

Tesco Store Implements ‘Bleak’ Security Measure, According to Money Blog

Next Post

Ex-EY Leader Varley Appointed Chairman of Private Equity-Backed Law Firm DWF

Read next
0
Share