First-time buyers need to borrow up to 15x their salary to afford a home in some UK cities, new report reveals

According to the new first-time buyer affordability report from Mojo Mortgages, a fee-free mortgage broker, aspiring homeowners in cities such as Bath may need to borrow up to 15 times their annual income. 

The report analyses the average salary, house price and required deposit in the top 80 most populous cities, highlighting the significant affordability challenges facing first-time buyers across the country. 

Key findings:

• Bath ranks as the least affordable city for first-time buyers, where solo buyers need to borrow 15.54 times their average salary and couples 7.77 times.

• Almost a third (30%) of towns and cities are unaffordable for couples on an average wage, exceeding the typical 4.5x mortgage-to-salary ratio.

• A staggering 96% of cities are unaffordable for solo buyers on an average salary.

• Middlesbrough is the most affordable city, where solo buyers need to borrow just 3.7 times their salary and couples 1.8 times.

Top 10 UK cities where first-time buyers face the highest borrowing requirements 

Southern cities are the most unaffordable with solo first-time buyers having to borrow >15x their salary 

The study uncovers a stark North-South divide, with southern cities like Bath, London, and Woking dominating the top 10 list of most unaffordable cities. In Bath, even couples on average salaries face borrowing 7.77 times their combined income, while solo buyers are looking at over 15 times their salary.

The City of London follows closely behind, with the highest average salary of £60,000, yet prospective solo homebuyers would still need to borrow 15.36 times their income to purchase a home.

Commuter towns and university cities are also unaffordable for first-time buyers 

The ripple effects of London's housing crisis are evident in surrounding commuter towns like Woking and Watford, where solo buyers face borrowing ratios of 14.70 and 14.16 times their salaries, respectively.

University towns also feel the squeeze, with Cambridge requiring solo buyers to borrow 14.46 times their annual salary, while couples need to stretch to 7.23 times.

Expert commentary: New Halifax and Lloyds 5.5x policy could ease affordability for first-time buyers in 27 cities

Last week, Lloyds Bank and Halifax increased their borrowing limit to 5.5 times income for mortgage borrowers up from the traditional 4.49 times—offering potential relief for first-time buyers in some cities.

John Fraser-Tucker, Head of Mortgages at Mojo Mortgages, comments:

"Our findings highlight the intense affordability challenges for first-time buyers across the UK, particularly in southern cities like Bath and London, where solo buyers face borrowing more than 15 times their salary. However, the recent change from Lloyds and Halifax to extend their borrowing benchmark may open up opportunities for first-time buyers across the country. 

"In fact, our analysis shows that this new 5.5x limit could make homeownership more accessible in 27 of the UK's most populous cities. A further 14 cities could become more affordable for solo buyers, and 13 cities would see increased affordability for couples on average wages.

"For example, a buyer earning £30,000 could now potentially secure a mortgage of £165,000, compared to £135,000 under the previous limit. This shift could open the door to homeownership for many in cities like Liverpool, Coventry, and Bristol, where affordability has been a significant barrier.

"However, it's important to approach this increased borrowing capacity with caution. While it may open doors to homeownership, it also comes with higher monthly repayments. With mortgage rates still elevated compared to recent years, first-time buyers must carefully assess their long-term financial commitments."

Mojo Mortgages recommends that first-time buyers seek professional advice to navigate these changes and find the most suitable mortgage options.