The UK housing market
MortgagesUnderstand how rising house prices affect affordability and why most buyers rely on a mortgage to get onto the property ladder.
Transcript
In the UK, house prices have seen significant long-term growth since the 1950s. This has outstripped the growth of people’s earnings, which means houses have become less affordable over the last few decades. This trend is called the increase in the house price to earnings ratio. This means it has become more difficult to buy a home based on your income.
House prices rise and fall with changes in interest rates and the economy. Rising prices increase the value of homes, but make it harder for buyers to get on the ladder. For people selling and buying at the same time, the benefit is limited as higher prices can make both selling and moving more difficult. The screen shows the current average salary and average house price in the UK.
Imagine you’re earning £37,000 a year. If you manage to save 20% of that income, that’s about £7,400 saved each year. Let’s say you were saving for a house valued at £290,000. To work out how long it would take you to save to buy the property outright, you divide £290,000 by the £7,400 you were able to save. This amounts to just over 39 years. That means if you wanted to buy a house outright with no mortgage, it would take you decades of saving, and that’s before prices rise further. This is why most people use a mortgage, because saving the full amount in cash simply isn’t realistic for most buyers.
Rising house prices mean the average first-time buyer is now in their 30s. Many first-time buyers are still teaming up to make the numbers work. Everyone’s financial situation is different. Some will earn a lot more than the average. Some will have help from family members or inherit money that helps them buy a home. We talk more about this and help from family members in our video on deposits.
So while buying a home can feel like a big challenge, it’s not impossible, regardless of the housing market you find yourself in. With the right planning, support and understanding of your options, many people do take the first step onto the property ladder.
All Adult Learning Modules
Budgeting
Module 1
In this module, you’ll explore how budgeting can help you plan ahead and manage the impact of rising costs.
Earnings
Module 2
In this module, you’ll learn how to understand your pay, spot any issues early and explore the different ways you can increase your income.
Freelance
Module 3
In this module, you’ll learn what freelancing involves, from getting paid to managing tax, expenses and day-to-day responsibilities.
Pensions
Module 4
In this module, you’ll explore how pensions work, from the State Pension to workplace and personal pensions, so you can plan ahead.
Debt
Module 5
In this module, you’ll learn how borrowing works, how to manage debt responsibly and where to get help if it becomes hard to handle.
Credit
Module 6
In this module, you’ll learn how credit works, different types of credit, how repayments are made and how interest and fees are calculated.
Mortgages
Module 7
In this module, you’ll learn how home buying works, the factors that shape affordability and how mortgages influence the overall cost.
Investing
Module 8
In this module, you’ll learn how investing works, how to manage risk and how to grow your money over time.
