House price rises preventing buyers from purchasing homes

Soaring house prices are preventing Brits from buying their first home, according to new findings.

In fact, a study by the Chartered Institute of Housing (CIH) revealed that the amount that first-time buyers would pay for a new home has soared by more than 100 per cent since 2001.

The average price paid by buyers has risen by 120 per cent, from £85,021 in 2001 to £189,668 in 2013.

At the same time, the cost of the average mortgage for property investors has risen by 110 per cent in the same period.

However, salaries have failed to keep pace with this collective 230 per cent increase, with income rising by just 164 per cent.

The increase in prices are resulting in a growing number of people being confined to a lifetime of renting.

According to the UK Housing Review 2014, the average mortgage for first time buyers was just over three times the average person’s income.

In addition, there has also been a rise in the number of homeowners unable to obtain mortgages with only 268,000 loans approved in 2013, compared with 568,000 loans secured in 2001.

Commenting on the findings, Grainia Long, chief executive of the CIH, said: "With house prices outstripping wages, home ownership is becoming increasingly unaffordable for the millions of people across the UK trying to take their first step on the housing ladder. 

"Many are being priced out altogether, meaning younger generations are being denied the opportunities enjoyed by their parents and grandparents."

On average, Brits spent 17.8 per cent of their income on mortgage repayments last year compared with 16.7 per cent in 2001.

However, the CIH noted that the figure could change drastically if interest rates rise as average rates in 2013 were only three per cent.

Ms Long added that a chronic housing shortage was helping to exacerbate the problem.

Published 15th April, 2014

© 2014 Estates IT Limited