It’s the perennial question of who had it tougher when getting on the property ladder: those who bought in the 1980s or those who are trying to buy now. Millennials today point to soaring property prices, while baby-boomers highlight record high interest rates. So, who really had it better?

House prices have risen…

On a pure price level, house prices were clearly cheaper in the 1980s than now. In 1980 the average UK house price was £20,897, while at the end of last year it was £235,298, according to Government figures. This means that assuming you want to put down a 5% deposit, the amount you need to put down has dramatically increased from £1,045 to £11,765.

…but earnings have also risen

Clearly in the four decades since the 1980s the price of everything has risen. And so while the average house is more expensive, the average salary is also far higher. In the 1980s the average UK annual salary was £6,214 while the average annual salary now is £30,420.

More helpfully, Nationwide has calculated the proportion of your annual salary that it takes for a first-time buyer to get on the property ladder. It takes the average price of a sample first-time buyer home across the UK and tracks the price of it and then compares it to average wages. The higher the ratio, the worse affordability is.

In 1983, when the ratio began, it stood at 2.7 – meaning it took 2.7 times the average annual salary to purchase a first home. This has increased to 5.1 in 2019 (the latest data available) – so it takes more than five times the average annual salary to buy a home today.

These affordability ratios vary depending on the region, and unsurprisingly it’s changed most dramatically in London, where it’s gone from 3.8 to 8.9.

On this measure it’s less affordable to buy a property today.

What about interest rates?

Those who bought in the Eighties quite rightly point to the fact that they paid eye-wateringly high interest rates on their lending, while today mortgage rates are near record lows. This means that it took more money for those buying in the 1980s just to pay the debt on their loans, let alone eat away at the capital.

The Bank of England’s base rate in the 1980s peaked at 15%, where in the past decade the highest it’s been is 0.75%, which is the current rate. In the early 1980s the mortgage market was also dominated by building societies and wasn’t as competitive as it is today, pushing rates higher. Rates were also variable until 1989, meaning if base rate rose so too did your mortgage rate, rather than having a fixed-rate option like today.

What about other costs?

As first-time buyers are older now they are likely to have higher other costs, as well as more debt, meaning saving for a deposit is tougher. The average first-time buyer is 30 years old so could well have children to pay for, student debt to pay off and other costs. The average person leaves university with £50,000 of student debt, and so paying this off will eat into a chunk of their income, if they took out loans.

Due to being older when they buy their first home, people are more likely to be in private rented accommodation before getting on the property ladder, and rental prices have risen dramatically. This means people could have less disposable income to save for a deposit.

However, you’re more likely to have both partners in the couple working, as more women work now. Those women are also likely to be earning more, as generally speaking more women have career jobs and higher salaries.

What about Government help?

One thing’s for sure, there’s vastly more Government help available for first-time buyers now. The Lifetime ISA, for example, offers up to £1,000 of Government money towards your deposit for your first home, while the Help to Buy equity loan means you can buy a property with a smaller deposit and smaller mortgage, by taking a loan from the Government.

The stamp duty break for first-time buyers means anyone buying a property worth £500,000 or less won’t pay stamp duty on the first £300,000 – saving them £5,000 at current rates. There are also other options available now that weren’t an option in the 1980s, such as shared ownership – where you buy part of the property and rent the remainder, with the option of buying more at a later date.

What does a first-time buyer look like today?

Average age: 30

Amount of household income
that goes on mortgage repayments (capital and
interest): 17.4%

Average mortgage size: £142,500

Average amount borrowed in relation to income: 3.65 times

Proportion of transactions involved the ‘Bank of Mum
and Dad’: 25%

Source: UK Finance and L&G.

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