Two incomes no longer enough as first-time buyers hit affordability wall

A growing number of aspiring first-time buyers are discovering that even two salaries may no longer be enough to get a foot on the property ladder.

Mortgage data firm Twenty7tec has warned that Britain could be reaching a ‘two-salary ceiling’ after new figures revealed that nearly six in 10 first-time buyers earn less than £60,000 a year.

With the average wage around £37,800, and property prices far outpacing earnings, affordability pressures are intensifying.

The company says home ownership is slipping beyond the reach of ordinary working couples as lenders continue to apply strict affordability tests.

‘Generation Rent’ will struggle

The firm’s head of lender, Nakita Moss, said: “We predict that those stuck in ‘Generation Rent’ will choose unconventional methods to get on the ladder.

“We are already seeing a steady rise in group mortgages, with friends or family members buying together, as well as intergenerational households and co-ownership living models.

“Longer-term lending is no longer a niche product but an essential tool, with many mortgages now stretching well into retirement.”

She added: “What concerns us, is that if the two-salary ceiling becomes the new normal, what other implications can this mean for buyers, especially second steppers and those looking to buy in later life?

“One thing is for sure, the traditional path to home ownership is being redefined and without intervention, could we see an entire generation priced out of home ownership altogether?”

Regional deposit divide

With the average home costing about £290,000, even couples earning £60,000 jointly can typically borrow only around £270,000, leaving a deposit gap of roughly £30,000.

Regional differences are widening the divide and in the South East, average prices are more than £440,000, effectively locking many buyers out of the market.

Meanwhile, northern cities such as Leeds and Manchester are seeing sharp price rises, fuelled by post-pandemic migration from London and growing investor demand.

Although average values in those cities remain closer to £250,000 to £260,000, prime neighbourhoods now command family home prices above £400,000.

Buying further afield

The result is a shifting map of affordability that is forcing many would-be homeowners to look further afield.

Government measures such as first-time buyer stamp duty relief have offered some relief, but Twenty7tec argues they do little to address the underlying issue.

The recent cut in the nil-rate threshold from £425,000 to £300,000 has also reduced the benefit for many.

According to the firm’s data, 15.4% of first-time buyers are now over 40, and the number of people aged 51 or above purchasing their first home has jumped by 80% in five years.