Why housing is at its 'least affordable' since records began, according to Leeds Building Society

Leeds Building Society said today’s average two-year fixed rate mortgage rate of 6.43 per cent may seem lower than the mortgage rates of 15 per cent in 1980, but surging house prices, driven by a lack of supply and historically low interest rates since the financial crisis of 2008, and the increase in household indebtedness, mean that the current mortgage rates are equivalent to a rate of 25.7 per cent in 1980.

In 1980, the average UK house price was around £21,000 and mortgage costs accounted for 11.3 per cent of disposable income. Today, those figures are around £292,000 and 45.1 per cent respectively.

In a statement, the mutual said: “Housing is now at its least affordable point since records began. The average home currently costs 9.1 times the average local wage compared to 3.5 in 1997 (Source ONS). This particularly impacts young people.

"Rates of home ownership amongst 25-34 year olds have collapsed over the last 30 years. In 1996, home ownership levels for this age bracket were 65 per cent. By 2016, the level for this age group had fallen to 27 per cent - giving them the label of ‘generation rent’.”

Skipton’s latest research with OnePoll reveals over half of Yorkshire’s 18 – 30-year-olds (56 per cent) fear their increased cost of living will see them dipping into their house deposit savings.

Many of the first-time buyers polled also weren’t aware of the Government changes that could impact the cost of their property purchases. Sixty one per cent weren’t aware of the recent government changes to stamp duty and two in five didn’t know the Bank of England base rate had increased.

Charlotte Harrison, head of mortgages at Skipton Building Society, said: “With so much happening in the economy right now from the increasing cost of living to Government changes, it’s understandable why people will feel confused and worried. But for those looking to purchase their first home right now, it must feel very daunting.”

Skipton Building Society is hosting a free event in Leeds to help provide support, education, and top tips for first time buyers at 6pm on Thursday, October 20.

Tickets to Keys to Your First Home Leeds – a Skipton Building Society Event can be obtained on Eventbrite.

Meanwhile, Leeds Building Society has confirmed it will support customers with a range of measures but underlined the need for Government to act as well.

Chief executive Richard Fearon said: “There is an urgent short-term need to restore market confidence and it is welcome news that the Chancellor has brought forwards his fiscal update to before the next MPC meeting.

"A credible balanced economic plan which has been subject to OBR scrutiny would reassure the markets, a lack of credibility could though trigger further uncertainty.

“But the longer-term aim of this Government should be to address the drastic shortage in housing. Borrowers now face the toxic combination of higher interest rates and a lack of suitable and affordable homes. With enough political will a decades-old problem can be​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ overcome, which would start to deliver on the homeownership aspirations of millions of people.”