Almost half of employed people in the UK said they cannot afford to buy homes, due to high day-to-day living costs, according to recent data released by merchant banking group Close Brothers.
The Close Brothers 2019 financial well-being index also highlighted that one in five Millennials do not possess any interest in getting on the property ladder in the future. However, 65 per cent of non-homeowners still have aspirations to buy their own homes at some point.
Too much spent on housing costs
On average, employees are paying 37 per cent of their salary on their monthly housing expenses. While the majority of employees believe their current housing to be affordable, 27 per cent of workers spent more than 50 per cent of their monthly income on their housing costs, while 10 per cent paid over 70 per cent.
On top of this, 13 per cent of those in work claimed that their housing costs were unaffordable, rising to 19 per cent for Millennials, according to Close Brothers.
While a rise in interest rates was estimated not to affect 37 per cent of those in work, approximately 63 per cent of employees and 76 per cent of millennials expected it to increase their housing costs.
Moreover, an average of 44 per cent of employed people said that they could only afford to get on the property ladder if they purchased with someone else. As many as 40 per cent reported that they may be able to buy homes, and that this would take more than ten years to save up for.
The index also found that 27 per cent of employees believe they are able to save enough to get on the property ladder within the next five years; however, as much as 39 per cent said they didn’t know where to start in order to purchase a home. This highlights the importance of providing those in work with the right consultation to help them get on the property ladder, according to the Close Brothers.
Poor financial well-being
Jeanette Makings, head of financial education at Close Brothers, commented: “Housing is a key area of financial wellbeing, and it’s heartening to see that employees record a relatively strong score here. However, there seems to be a gap between perception and reality.”
Ms Makings added that while there was confidence around affordability, a major proportion of people’s incomes are going on housing costs. In her view, this makes saving for the future more difficult and contributes to the scale of uncertainty, when it comes to taking the first step onto the property ladder.