The UK continues to suffer from a significant housing affordability problem, the latest report from the Intermediary Mortgage Lenders Association has found.
The report, titled the ‘The Mortgage Affordability Paradox’, shows that mortgage interest and capital repayments as a percentage of home buyer income were at a record low of 16.7% last year.
However, despite record-low mortgage rates, the UK’s house price earnings ratio continues to grow.
Imla points out that in June 2021, the UK’s house price to earnings ratio reached 8.8 times, a record national high, while the ratio reached 11.0 in London in Q3, 2021; more than twice that of the Northeast of England.
Since 2007, a cumulative shortfall of 2.7 million first-time buyers has arisen, with 2020 seeing a shortfall of nearly 200,000 against expected purchasers based on previous behaviour.
Imla found that nationally, those who own instead of renting see a comparative 25% reduction in their living costs. Homeowners experience relative cost savings in every region in England, including London and the Southeast where owning is a fifth cheaper. In Scotland, the gap grows to 43%.
On the plus side, research Imla reveals that mortgage lenders remain keen to lend to the self-employed (88%), people with credit impairments (46%) and those with irregular incomes (71%). It also uncovered that 46% of lenders have even made changes to their criteria to cater for people that were financially impacted by the coronavirus crisis.
Imla executive director Kate Davies says: “We speak often about the challenges that plague the housing market, but our latest report brings to light just how severe these are. Even with the costs of borrowing at relative lows, many aspiring homeowners will still struggle to step onto the ladder without the support of loved ones.
“This paradox is something that we must all tackle to ensure the same opportunities that we have benefited from are made available to coming generations. A previous IMLA report looking at the UK’s intergenerational wealth divide found that paying a mortgage rather than renting privately could leave the average person £350,000 better off over a 30-year period. We also know that homeowners have lower living costs compared to renters.
“It’s certainly time for a rethink. We need a clear vision of how the many components of the housing and mortgage market pull together to boost housing supply, better keep house price growth at controlled levels, and, ensure safe borrowing practices. Some time on from the peak of the pandemic disruption we would urge Government to again place this high up on its ‘to do’ list.”
