Home ownership in the UK is just a pipedream for half of employed people due to high day to day living costs, meaning they cannot afford to get on the property ladder, new research suggests.
It is still an aspiration for 65% of non-home owners but 47% do not think they will be able to afford to buy their own home, according to the financial well-being index from Close Brothers.
Some 27% are spending more than 50% of their monthly income on housing costs, and 10% are spending over 70% while 13% say that their housing costs are unaffordable, rising to 19% for millennials
It points out that official figures published by the Office for National Statistics shows that average house prices in Britain have increased by more than 270% over the past two decades and this has pushed back the age that people become home owners by at least eight years since 1997.
It also says that while there is potential for improvement as house price growth is at the lowest annual rate since September 2012, if growth continues to stagnate while wages improve, home ownership could become a more feasible ambition. But to successfully save for a property, employees must have a financial plan in place.
It believes it is a concern that four in 10 employees said they don’t know where to start when it comes to getting onto the housing ladder and this, more than anything, highlights the importance of offering employees the right advice to help them reach their long term savings goals.
The research also found that 63% of employees would expect to see their housing costs increase in the case of an interest rate rise. Of these, 65% said that this is because they have a variable rate mortgage. Millennials are most exposed as 76% would see housing costs rise in the case of a rate rise.
‘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,’ said Jeanette Makings, head of financial education at Close Brothers.
‘While there’s confidence around affordability, a huge proportion of people’s salaries are going on housing costs. 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,’ she pointed out.
According to professor Cary Cooper, an expert in workplace well-being at the ALLIANCE Manchester Business School, University of Manchester, being worried about housing affordability can damage a person’s well-being regardless of whether they’re at home or work.
‘Whether it be paying the rent, taking the leap as a first time buyer, or the impact of a variable interest rate in times of economic uncertainty, it’s vital that employees are comfortable and confident in how to approach their finances when it comes to housing,’ he said.
Source: Property Wire