What Income Do You Need to Buy a Home in 2024?

Posted on 1st July 2024
Category: Property Blog

Buying a home has become more challenging in recent years due to rising property prices and mortgage rates. Let’s break down what this means in real numbers and discover the most affordable places to buy in the UK.

Key Takeaways

First-Time Buyers (FTBs): Need an income of £60,600 to buy a home, equivalent to two average UK salaries.
Existing Homeowners Upsizing: Require a household income of £72,600 to buy an averagely-priced home.
Increase Over Last Year: Income requirements have increased by £2,400 for FTBs and £3,400 for upsizing homeowners.
Most Affordable Regions: Northern England and Scotland are the most affordable areas for lower incomes.

Understanding the Income Needed to Buy

Affordability is a major barrier for homebuyers. While deposits are often discussed, the household income needed to finance a mortgage is equally crucial. Mortgage lenders use income levels to assess affordability through a loan-to-income ratio.

First-Time Buyers: Typically have lower deposits than existing homeowners looking to upsize. The higher the deposit, the lower the income needed to buy.
Loan-to-Income Ratios: FTBs usually take mortgages that are 3.3 times their household income, while existing homeowners average 3 times their household income.

Using these ratios and average home prices, we can determine the household income needed for different types of buyers.

Income Needed for First-Time Buyers

A first-time buyer aiming to purchase a typical home priced at £250,000 with a 20% deposit would need an annual household income of £60,600. This figure is £2,400 higher than last year.

Income Needed for Upsizing Homeowners

Homeowners looking to upsize to an average-priced home listed at £335,000, with a 35% deposit, would need a household income of £72,600. This is an increase of £3,400 compared to the previous year.

Comparing Income Requirements to Average UK Salaries

The average UK household income is currently £33,300. Therefore, two average earners combining their incomes to £66,600 could afford a typical first-time buyer home. However, they may struggle to upsize without a larger deposit.

Regional Differences in Income Requirements

The income needed to buy a home varies greatly across the UK. Let’s explore some regions:

Northern England: The most affordable area for FTBs, with homes in the North East costing around £120,000, requiring an income of just under £29,100. In Hartlepool, homes priced at £80,000 need a household income of only £19,400.
Scotland: The second-most affordable region, where a typical FTB home costs £135,000, requiring an income of £31,500. In Ayrshire, you can buy with a household income of under £20,000.
Midlands and Wales: Homes are generally priced below £200,000, meaning an income below £49,000 is needed.
Southern England: Income requirements are higher, ranging from £33,900 in Great Yarmouth to £193,900 in Kensington and Chelsea.

Upsizing Homeowners

Upsizing homeowners face higher income requirements:

Northern England: Household incomes needed range from £31,400 (Blackpool and Hull) to £78,000 (Trafford in Manchester).
Scotland: An average home priced at £200,000 requires an income of £43,300, ranging from £27,100 in East Ayrshire to £62,800 in East Lothian.
Midlands and Wales: Generally need incomes above £54,000, but areas like Blaenau Gwent (£32,500), Stoke-on-Trent (£39,000), and Bolsover (£46,600) are more affordable.
Southern England: Higher incomes are needed due to higher house values, often exceeding £300,000. Smaller cities like Plymouth (£52,000), Norwich (£54,200), and Portsmouth (£57,400) are more affordable.
London: The highest income is needed, averaging £124,600. However, East and South East London require incomes below £100,000.

Why Are Incomes So High in 2024?

The required income to buy a home has increased by 4% over the last year due to higher asking prices and a slight decline in the loan-to-income ratio. Buyers can adapt by putting down larger deposits, extending their search area, or considering different property types.

Strategies for Buyers

Many first-time buyers are broadening their search radius to find affordable options. Approximately 2 in 5 buyers are looking beyond a 10-mile radius to find their next home due to affordability pressures.

Conclusion

Understanding the income needed to buy a home is crucial for navigating the property market in 2024. While affordability remains a challenge, expanding your search area and considering different property types can help you find your perfect home within your budget. We are happy to go through a range of properties to help find the home that’s just right for you.

Adapted from Zoopla

Thanks for reading.

Michael