Why low to middle income families cannot afford a mortgage

Alex Johnson

1cc62a69528980a41098121c7021bb3176f6c73e 300x199 Why low to middle income families cannot afford a mortgageLow to middle income families, those typically earning between £20,000 and £40,000, were once able to afford a decent, family home of their own. Not any more according to figures from housing charity Shelter which indicates that 1.8 million of these families are unable to afford the mortgage on a local three bedroom home.

Instead, more and more low to middle income families are living in private rented accommodation with short tenancies and concerns over rent increases. Other low to middle income families are stuck on the lower rungs of the property ladder and unable to afford enough space for their family.

The report’s author Robbie de Santos says: “Help to Buy will be of little help. The mortgage indemnity scheme’s 95% mortgages will make the mortgage costs on family homes higher than under the status quo. Family homes unaffordable to 78% of low to middle income families with these big mortgages.”

Instead he suggests that the shared ownership model can be most affordable for low to middle income families, particularly where smaller shares (12%) are available. “Some 95% of low to middle income families would be able to afford a three bedroom home with shared ownership,” says de Santos.

“We need a lot more shared ownership, and it needs to operate much more like the mainstream market. The Homes for Forgotten Families report sets out how a how a ‘high street’ shared ownership market would work to help these families afford a decent, stable home that meets their needs. We want to see politicians lead the way in creating a bigger, more mainstream shared ownership market. A commitment of £12 billion over four years could provide affordable families homes for 600,000 forgotten families, and making substantial headway in reducing our homes shortage.”

Latest house price figures
The latest round of house price figures are now out, these ones from the Land Registry. They show an annual price increase of 0.8 per cent which takes the average property value in England and Wales to £164,098 (although other house prices indices would quibble with this). The monthly change from June to July shows an increase of 1 per cent, with repossession volumes down by 23 per cent in May 2013 to 1,365 compared with 1,765 in May 2012.

Jonathan Harris, director of mortgage broker Anderson Harris, said: “House prices continue their steady ascent, particularly in the capital, which has been by far the strongest performing region in the past year. Yet even so, the number of first-time buyers is also increasing, according to recent CML data, showing that these price rises are not deterring them from getting on the housing ladder. The number of homes being repossessed also fell although it is still worrying that anyone is being repossessed when mortgage rates are so low. It goes to show that while confidence is returning to the housing market there are still some underlying problems, recovery is likely to be slow and when interest rates do start to rise there could be many who find themselves in difficulty.”

Zoopla video
Zoopla – one of The Independent’s partners – has been working with real estate video company VistaBee to start adding short films of property for rent or sale to the site (click here for an example, a video of the London flat pictured above). The videos are shot in high quality HD format and integrated into listings in the same way as photo slideshows.

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  • fz6734

    What a shame, excessive leniency on the profit motive in house-jumping leads to excessive prices which ultimately leads to this unfortunate result. I suspect we will soon be paying for insurance on our bank deposits as they do in America, and interest rates for depositors will drop to zero as they did in Japan.

  • powertothepeople

    lousy video by zoopla. first of all its an ad, not a documentary. there is no sense of scale, probably because the flat is small. where is the storage space in the bedrooms for instance. it might be shot on hd, and by some seasoned director but it aint selling the flat in terms of how big it is.

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