Call for long-term strategy as studies find widening gap between earnings and mortgages, lack of affordable housing and 64% increase in ‘risky’ lending

The financial challenges facing would-be home owners will be laid bare on Monday by new research showing that a first-time buyer now needs to earn £77,000 a year to get on the housing ladder in London.

Across the UK, a first-time buyer needs a minimum income of £41,000, according to the report from KPMG. It also shows that affordable housing has become an issue for all but the above-average earners and those coming into inheritances.

With the election just a few days away, the consultancy is calling for an apolitical long-term housing strategy to tackle the worsening housing crisis.

The research by KPMG comes as analysis pointed to a 64% increase since 2010 in new mortgage lending that would be viewed as risky by the Bank of England. According to the accountancy firm Moore Stephens around 88,817 mortgages were lent at 4.5 times salary or abovelast year. In 2010 the figure was 54,023.

The annual wage of nearly £77,000 that a first-time buyer needs in London compares with the average annual wage in the capital of just £27,999. Across the country, a first-time buyer needs to earn £40,553 to get on to the property ladder, against an average wage of £22,044.

The regional breakdown by KPMG shows that in the south-east a first-time buyer would need an annual wage of £46,010, against the actual average wage of £24,391. The smallest gap is in Northern Ireland where the average wage is £18,857 against the £21,219 needed; in England the narrowest gap is in the north-east with an average wage of £20,149 against £23,616 needed.

Jan Crosby, the head of housing at KPMG, said: “These figures make for frightening reading and show that housing affordability is no longer just a problem for lower wage earners. Now, unless you earn well above average or receive an inheritance, it is unlikely you will be able to afford to buy, no matter where in the UK you live.



“And yet this isn’t just about home ownership, because our findings show genuine concern over wider affordability of housing, whether buying or renting. Being able to live in a stable home is a basic human need, tied up with important feelings of choice and certainty, and we are living in a world now where only a few can hope for that, which cannot be right.”

The figures are based on a 10% deposit and borrowing the remaining 90%, with loans at 4.5 times salary.

A KPMG-commissioned poll shows that 69% of people feel there is not enough housing in the UK that is affordable, with nearly a third concerned about how they will afford or continue to afford their own home, or pay their rent.



Britain remains a country of aspiring homeowners, as 73% of people said they would prefer to buy than rent. Almost three-quarters of 16 to 17-year-olds want to be on the property ladder within 10 years.

KPMG and the housing charity Shelter say that 250,000 new homes need to be built every year to keep up with demand. They have drawn up a blueprint for the new government that includes further unlocking public sector land banks, boosting small and self-builders, giving power to towns and cities to build the homes they need, and increasing investment in affordable homes.