- Primary salary of HTB2 buyers is £12,000 less than the average across the purchase market
The average salary of homebuyers using the government’s Help to Buy mortgage guarantee (‘Help to Buy 2’ or HTB2) dipped 11% in the final three months of 2014 from £31,270 to £27,957 according to new data from Mortgage Advice Bureau – the UK’s best known broker brand*.
This activity among lower earners is in contrast to the trend in the wider purchase market, where the average salary of primary borrowers increased marginally from £39,834 in September to £39,983 in December.
It meant the average HTB2 homebuyer’s primary salary in December was £12,000 lower than the purchase market average. The data suggests the scheme is continuing to provide an important route for lower earners to access the housing market and secure a mortgage with a deposit of just 5%.
Lower salaries among HTB2 buyers were accompanied by a 4% drop in the average price of a home bought through the scheme from September to December (down £6,761 to £143,727).
The same period also saw a 5% dip in the average loan size (down £6,714 to £134,800) as consumers took modest steps onto the property ladder and limited their borrowing commitments.
Mortgage Advice Bureau’s analysis of Office for National Statistics data shows that twice as many working adults aged 30-39 (the key first time buyer demographic) can match the earnings of the typical HTB2 customer, compared with the typical homebuyer across the wider market.
Among 5.02m working adults aged 30-39, just 19% (947,500) earn as much as December’s typical homebuyer (£39,983). In comparison, 38% or 1.93m (an extra 980,100) earn at least £27,957: the average salary among HTB2 buyers.
Buyers using the Help to Buy equity loan scheme (‘Help to Buy 1’ or HTB1) typically have higher salaries than HTB2 customers (£32,103 in December 2014, 13% more than the HTB2 average). Even so, 1.66m working adults aged 30-39 (33%) can match this salary: 707,400 more than earn as much as the typical homebuyer on the broader market.
Over the whole of 2014, the average HTB2 buyer was aged 31.6, compared with 32.1 for the HTB1 scheme – both more than four years younger than the average age of 36.8 across the whole of the house purchase market.
Brian Murphy, head of lending at Mortgage Advice Bureau, commented:
“The recent dip in the average salary of Help to Buy 2 borrowers is encouraging news from the perspective of aspiring first time buyers. It is reassuring to see that people with more modest salaries can still access the housing market without needing to command high salaries or have saved a large deposit.”
“It is important to remember that these borrowers are still subject to rigorous affordability tests, which ensures that their household finances are secure enough to manage their repayments even when interest rates rise.”
“Comparing the scheme to the broader market shows just how effective it is in terms of helping younger borrowers and widening social access to homeownership. The availability of high loan-to-value (LTV) mortgages – both through the government scheme and on the wider market – will be vital to continuing the recovery of first time buyer numbers in 2015.”