Buying a home in London requires an average earner to save a deposit of over £360,000, research by April Mortgages has revealed.
With average house prices in the capital soaring to £581,310 – more than 12x the average income – average earners require huge deposits to afford a home.
Based on a typical lending limit of 4.5 times income, a single mortgage applicant earning a median London salary of £47,086 would need a deposit of £369,423 to buy an average priced home in the capital.
In Kensington and Chelsea – where the average home is now worth more than £1m – a borrower on an average income would need to put down at least £884,296.
In Westminster, this figure stands at £645,937, and in Camden, a deposit of £608,163 would be needed.
With lenders generally capping loans at 4.5 times income, average earners putting down a standard 10% deposit as a single mortgage applicant, would be unable to afford the average priced property in all of London’s 33 boroughs.
In 25 (76%) of the capital’s local authorities, a borrower earning an average wage would need a deposit of more than £300,000 to buy an average priced property.
The most affordable borough to buy a home in London is Barking and Dagenham, where house prices (£355,594) are 9.74x the average income, meaning an average earner would need a deposit of £191,373.
While affordability is less of a barrier for couples, it remains a major challenge in London where dual income applicants still need an average deposit of £193,107.
A couple would need a deposit of over £200,000 in 14 of London’s 33 boroughs and only four of the capital’s local authorities are affordable for average earners with a 10% deposit.
To support the challenges faced by so many Londoners April Mortgages have recently launched a range of modern mortgage products that offers single and joint applicants mortgages of up to six times their income, including first time buyers, homemovers and remortgagers.
Mark Eaton, COO, longer-term fixed rate lender April Mortgages, said: “The prospect of owning your own home in London is becoming a pipedream for the majority of average earners.
“The speed at which house prices are rising is leaving many first-time buyers unable to afford a home.
“House prices have soared over the last 20 to 30 years and are estimated to be worth over thirteen times the average household income in London.
“This issue is being compounded by banks and building societies’ strict lending criteria and tough affordability tests which makes accessing the mortgage loans needed very difficult.
“While these measures were originally put in place to protect borrowers, they are now having a punitive effect on those who are in most need of support.”
He continued: “Furthermore, there are so many potential homeowners that are still unaware of the option to borrow up to six times income and maybe unnecessarily spending thousands of pounds on rental costs instead of taking the first step onto the property ladder.”
