£60,000 earnings needed to buy a property in Bristol!
Hometrack released its latest housing report this week. The report states that the average property price in Bristol is now £282,500. That is a 3.2% increase year on year from 2017 and 42% higher than the pre-market crash year of 2007. Only Oxford (£423,400), Cambridge (431,600) and London (£485,300) have higher average property prices.
The cost of housing continues to outgrow earnings levels. This is likely due to low mortgage rates resulting in affordability for higher loans. At Fox Davidson we have seen first-hand that an increase in the bank of England base rate to 0.75% has not affected the rates lenders are offering clients. In September 2017 we secured a 2 year fixed rate with Virgin money at 2.13%. This month the same bank is offering 2 years fixed rate at 90% at just 1.86%. lenders have clearly absorbed the rate increase and therefore the increased cost of funds. Lenders are doing this to keep top of best buy tables as the mortgage market is fiercely competitive. Furthermore, most lenders now offer free property valuations and cash back for purchase mortgages.
The report also focused on the income a first-time buyer should earn to afford an average property in Bristol. Worryingly for many first-time buyers the average income required to purchase a property in Bristol is approx. £60,000. This is an increase since 2015 of 24% and the largest increase across all 20 cities hometrack follows.
The income ranges from £25,000 in Liverpool to £82,000 in London.
First time buyer – Income to buy.
** Source: Hometrack calculations: Income to buy is the gross income required to service a 30- year repayment mortgage or a maximum loan to income (LTI) whichever is greater
How accurate is the income to loan calculation?
Fox Davidson have access to the whole of the market and can utilise lenders that treat income and outgoings in different ways. We looked at three lenders; Halifax, Accord and NatWest to ascertain how much a first-time buyer could borrow with an income of £60,000 (single applicant, no dependents).
- Halifax £285,000
- Accord £300,000
- NatWest £291,000
(Calculations are based on a 30 year mortgage repaid on a capital and interest basis. Applicant with no debt and a clean credit history.)
As you can tell the report is quite accurate with all 3 lenders offering £285,000 or more for a single person with a salary of £60,000.
How much would a mortgage cost for an average property in Bristol?
Using the average property price of £282,500 and a 5% deposit of £14,125 the monthly repayments on 2 year fixed rate of mortgage of £268,375 would cost approx. £1,175 pm.
What is the average income in Bristol?
According to payscale the average salary in Bristol is £28,436 which means that unless you are buying with a partner you would not be able to afford a mortgage on an average property in Bristol without a huge deposit of 50%.
Will Brexit affect property prices in Bristol?
Yes…, no…, maybe? To be clear, no one knows the actual effect Brexit will have on property prices. Any publications stating 30% falls in property prices are pure speculation.
There are 3 factors that we do know; unemployment, interest rates and housing stock.
Unemployment is at all time lows. In Bristol employment rates are around 75%.
Interest rates are near historic lows making mortgages more affordable. Our view is that a rise in interest rates will have the biggest impact on property prices. Rising mortgage repayments will mean buyers can’t afford to borrow as much and property prices will have to adjust.
There is still a lack of housing stock. A report from the house of commons states that new housing stock will run at 210,000 new homes each year from 2014 to 2039. This is still short of the 240,000 to 250,000 homes that are needed to keep pace with household formation.
Brexit is an enigma.
To discuss mortgages with a Bristol mortgage broker contact Fox Davidson to see how we can help. We work with first time buyers, landlords and developers to fund property and land across the UK.