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Why our key workers can’t afford the property ladder

Average mortgage payments in England and Wales reached £590 in April, up £78 on the same period last year. The average household is now spending 19.9 per cent of their take-home pay on their mortgage payments, the highest amount since January 2002, when the average spend on mortgages was 15.9 per cent. Any rise in mortgages costs will also fuel the market dealing in remortgages.

This month lenders are expecting the figure to rise above 20 per cent for the first time with key workers, such as nurses, among those that have been priced out of almost all UK towns and cities. Research from Halifax indicated that the typical property in 70 per cent of towns was now beyond the reach of five key worker groups including nurses, teachers, police officers, firefighters and paramedics. The figure is up from the 65 per cent recorded last year and almost double the 36 per cent of towns that were deemed to be unaffordable in March 2002.

By region, London and the South West proved to be the least affordable area for key workers. In all 32 London boroughs and 34 towns across the South West average key worker salaries would not be able to afford the typical house prices that are now well over £300,000. Continued house prices is also helping to support the market dealing in remortgages. In the capital, the house price to earnings ratio for a nurse stands at 10.1, meaning the average property is valued at more than ten times their annual gross average earnings.

Over the past five years, 61 towns have been moved from being affordable for all key workers to being unaffordable and half of the 10 most affordable towns for public sector employees are in Scotland. Housing affordability continues to deteriorate for key workers across Great Britain and it is now clearly not just a problem confined to the south of England. The Government's key worker schemes are providing some relief but given recent trends it would clearly be beneficial for it to broadening its reach.

Since 1997 almost 25,000 key workers have got their first step on the property ladder through Government shared equity and shared ownership schemes. This means people have stayed in crucial frontline jobs with six out of 10 key workers admitting that the Government schemes have helped them continue in their chosen professions. To tackle affordability in the long run, more homes need to be built throughout the UK, not just in major cities. However we as borrowers also need to help ourselves by increasing our savings and start thinking about buying a house sooner rather than later.

Last month, it was revealed that some UK lenders are now charging buyers an average of £2,000 if they do not have 10 per cent of the property’s value as a deposit for a down payment. The 'higher lending charge' will raise over £220 million for banks and building societies in 2007 alone and will affect over 100,000 borrowers – affecting those will smaller or stable incomes the most.  The Government needs to lend a helping hand when it comes to those key workers taking out a mortgage. With the base rate continuing to rise every year (and more), key workers may find their homes becoming too expensive to keep as they’re wages are not rising consistently with the rate rise. 

The author is Melinda Varley who an experienced journalist currently specializing in articles for the financial field. Melinda has held several positions for magazines and newspapers both hard copy and online and both in the UK and Australia which is where she originates from.

This article was written on the 24^th May 2007.

This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase.

The views in this article represent those of the author and not those of Netbasic Limited.