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How difficult is it to buy a home?

How difficult is it to buy a home?

Category: Mortgages

Updated: 22/04/2015
First Published: 22/04/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It's never easy getting on the housing ladder, but research has revealed that it's now even harder than it was a year ago, thanks in no small part to rising house prices and living costs. But, are improvements on the horizon?

Ability to buy deteriorates

According to the latest Ability to Buy Index from Hamptons International, the ability to buy a home deteriorated further in 2014, which means the typical buyer will find it harder to move on, or up, the ladder than in 2013.

The Index, which tracks households' ability to service a mortgage by taking into account income tax, essential spending and mortgage costs, shows that typical ability to buy deteriorated by 2% in 2014. The rising cost of utilities, higher house prices and slow earnings growth were cited as key drivers behind this drop in affordability.

Although earnings growth reached 1.4% in the final three months of 2014, this was dwarfed by house price growth of 7% and the rise of utility bills by 2.2%, both of which outstripped the rate of earnings growth – despite the improvement seen at the end of the year.

Signs of improvement

However, it's not all bad news. The report noted that underlying conditions are improving, with the cost of food falling by 1.7% and transport by 0.4%, while mortgage rates are at record lows.

There are also marked geographical variations, with some parts of the country noting real improvements: for example, the South West saw the biggest increase in ability to buy, posting a 6% rise in 2014, fuelled by more modest house growth (5.5%), the largest wage growth in the country (4.5%), and lower spending on food and transport.

Perhaps understandably, London saw the biggest deterioration in ability to buy, largely due to the 17% increase in house prices over the year, increases in costs and a 1.6% fall in income. Nonetheless, the tide could be turning, with analysis suggesting that conditions are getting better across the board.

The future's bright?

Despite ability to buy being worse at the end of 2014 than it was in the year previously, it deteriorated less than it did in the third quarter of the year. All areas (bar London) also find it easier to buy than at the peak of the market in 2007, with ability as a whole being 53% better.

Then there's the fact that house price growth has displayed welcome signs of moderation in recent months, not to mention inflation staying at its record low of 0%, which should boost consumer spending power and confidence – and more money in your pocket means mortgage affordability could improve. Hopefully, the cost of utilities won't rise excessively (and you could even lower your bills by comparing gas and electricity tariffs), and if all goes to plan, wage growth looks set to continue.

All in all, the future's looking bright, and if you've got a decent house deposit saved up, it could be time to start considering your options. Compare first-time buyer mortgages if you're hoping to take that first step, and if you've done the necessary preparations, hopefully you won't find it too difficult to get on the ladder.

What next?

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