Is your household income affecting your move up the property ladder?

When it comes to buying property, most of us are bound by our annual income. It affects the type of property you’re able to choose, the size and even the location as these factors have a major effect upon the price of the home and the required down payment. You may be lucky enough to pool you and a partner’s earnings together or be making a solo transition but nonetheless, household income directly affects whether you’re able to purchase property for two main reasons – affordability and the deposit.

It’s not enough to be able to afford the bricks and mortar; when the bills come flooding in you want to be able to hold your head above water and be financially secure enough to afford the maintenance of your property. Being crippled by expenses will rapidly suck the fun out of your dream home so it’s important to really consider your salary and be realistic with what you can afford.

Although there are several private and Government-aided initiatives which offer equity loans to assist you in buying your first home, mortgage lenders are still asking for huge sums of money. Figures from the latest RBS, Ability to Buy Index indicate that despite an expected future fall in house prices and rise in earnings, an average UK first-time buyer (FTB) household would have to save for 37 months to raise a 10% deposit.

Varying across the country, those in the South East save for an average of 43 months which has increased by 2% in the same quarter from 2011 (quarter 1). Compared to the rest of the UK, Londoners are considerably worse off having to save nearly twice as long for a deposit (51 months) with higher rents taking 75% of earnings after essentials compared to 50% for everyone else.

According to recent research by uSwitch.com, the average monthly household income is currently £2,504 but respondents have said it would take an extra £1,500 per month to feel financially secure. Based on the definition of ‘financial security’ which can be described as having enough money in the bank to cover basic living costs without having to turn to credit or not having any unsecured debts, just 40% of Brits would put themselves in this category.

Michael Ossei, personal finance expert at uSwitch said: “Cutting back on credit and reducing your debt in the current climate is one of the best things you can do and will put more people back in control of their finances.

“Saving a little and often can make a big difference and cutting back on household bills like energy could free up some cash to help you feel more financially secure.”

If you think you’d benefit from having free debt advice from one of our property consultants please call Jemima Poppy now on 07890 527046 or visit our website to see what else we can do for you and your home.